Non-Disclosure & Confidentiality Agreements
Information and intellectual property are a valuable asset class for commercial enterprises. There are many occasions where it may be necessary for a business to share sensitive information with a third party, such as:
– negotiating with a potential new business partner or investor;
– negotiating a new contract with another business or contractor;
– entering into settlement agreements; and
– hiring new employees.
Non-disclosure agreements (NDAs) are an important tool that can be used to protect this information from being used or shared with others.
What is an NDA?
NDAs, sometimes called Confidentiality Agreements, are binding agreements that establish an obligation of confidentiality between parties. NDAs can be mutual, meaning both parties agree not to share each other’s information, or unilateral, meaning only one party agrees not to share the other’s information. The form of the NDA will depend on the parties involved and the information being disclosed.
Do you need an NDA?
NDAs are effective at protecting confidential and commercially sensitive information, however they are not always necessary. Ask yourself these questions if you are considering whether an NDA is needed:
1. Can I negotiate, or deal with the 3rd party without sharing the confidential information?
If the answer is yes, then you will not need to enter into an NDA, however if there is a possibility that you will need to disclose commercially sensitive information, then you should err on the side of caution and have the other party sign an NDA.
2. Is the information already in the public domain?
If so, there may be little benefit in entering into an NDA to protect this information.
3. Is the information already protected by legislation or industry regulations?
For example, your lawyers and accountants will already be subject to a duty of confidence – you do not need your lawyer to sign an NDA for your information!
4. Could your business suffer loss or damage if the information was shared?
If there is a risk of damage to your business, then it is likely that an NDA is appropriate.
What if someone breaches an NDA?
If there is a breach, or anticipated breach of the confidentiality obligations under an NDA, the terms of the agreement will be determine what action and remedies are available to the aggrieved party.
An anticipated breach of the agreement (i.e. where a party is threatening to leak or unlawfully use your confidential information) may require a court order for an injunction to prevent the information from being disclosed.
Should I sign an NDA without legal advice?
We recommend you take legal advice before signing an NDA. In addition to personally maintaining the confidentiality of the information subject to the NDA, NDAs can impose strict obligations on a party to:
– securely store and protect confidential information from things like loss, theft or unauthorised access;
– have other parties agree to the non-disclosure obligations if the information is lawfully disclosed;
– take steps enforce the duty of confidence against a third party who has received the information, at the receiving party’s expense; and
– return the confidential information to the discloser, or securely destroy it, at the request of the disclosing party.
NDAs also often include indemnity clauses that can make you liable for the actions of others. For example, you may be liable for any losses suffered by the disclosing party if a third party to whom you have lawfully disclosed the information does not adequately protect it, or breaches their duty of confidence. This could be both financially and reputationally damaging for you or your business.
It is important that you understand your full obligations under these agreements so you can take the right precautions and only use the information as authorised.
If you are asked to sign an NDA, you should have your lawyer review the NDA and provide advice on the document, and where necessary, negotiate changes to the agreement with the other party.
Get in touch with our Commercial Law team for advice on NDAs and other commercial agreements.
