Non-Disclosure Agreements

Authored by: Charlene Angeline Jackson

Introduction

In the competitive realm of business, the safeguarding of sensitive information is paramount to achieving success. One sure way of protecting sensitive information is through a non-disclosure agreement which is commonly referred to as an NDA. An NDA has proven to be an indispensable tool to companies and individuals, especially in terms of the protection of valuable trade secrets and confidential information. NDAs are generally governed by the law of contract.

Legal implications of NDAs

A non-disclosure agreement is essentially a legally binding agreement which is utilized in a diverse array of business dealings, serving as a shield against the potential misuse or exposure of privileged knowledge. An example of this is where in a labour dispute an employer and employee enter into negotiations and parties agree on a settlement amount as a severance package. In that instance, an employer would want to bind the employee to a non-disclosure agreement to ensure that he maintains confidentiality of how much they paid the employee or the nature of the dispute.

Another instance where an NDA would be utilised is in the case of two companies which are considering embarking on a joint venture project. A non-disclosure agreement would ensure that the material terms and conditions of the joint venture remain confidential information and will not be disclosed to third parties thus safeguarding the parties from unfair competition in the market.

Types of non-Disclosure Agreements

There are various types of NDAs which parties may enter into depending on their circumstances. Some of these include but are not limited to unilateral NDAs, employer-employee NDAs and company contractor NDAs.

Unilateral NDAs

A unilateral NDA is also known as a one-way NDA and only requires that one party must disclose its confidential information to the other party. For instance, when a company is required to disclose confidential information such as the number of shares to employees, advisors, clients, partners, and other stakeholders then a one way NDA would be adopted.

Employer-employee NDAs

Another example of an NDA is the employer- employee NDA whereby employers bind their employees to a confidentiality agreement in the form of NDAs once they are hired. In this instance, such an agreement restricts the employees from using and disseminating confidential company information in the form of trade secrets, business and development plans, pricing data and supply sources. This also ensures that in the event that the employee leaves his employment, he remains bound to the agreement and maintains confidentiality.

Company-contractor NDAs

This form of NDA is utilised by companies with the aim of limiting their contractors from sharing confidential company information with third parties. Like employer-employee NDAs, company-contractor NDAs limit contractors from sharing critical business information that has the effect of reducing the competitiveness of the company. This may include supply sources, method of pricing and any other sensitive information the company wishes to safeguard.

Whilst NDAs often offer many disadvantages, it is important to know what may not be included in such an agreement. The reason for these exclusions is to protect the general public from being bound by agreements that are against public policy or are enforceable.

Exclusions to NDAs

NDAs may not restrain the sharing of information that is common knowledge or already in the public domain. This includes any information that may be widely known or considered public knowledge in the area of trade or generally. However, such information is only limited that which becomes publicly known through no fault of the intended recipient of the NDA. Furthermore, information that the receiver of the NDA already knows such as trade secrets, before receiving the agreement may not be included in the agreement. This ensures fairness in contracts.