What are the common terms and provisions of a non-disclosure agreement?

Multiple online platforms have emerged recently that offer downloadable standard templates for little money. When using any of those platforms it is important to remember that there are certain legal requirements to the form and content of the agreement in order to make it enforceable. The danger with executing legal instruments without assistance of a business attorney is that you will not know whether it accomplishes the purpose before a problem happens and you need to enforce it. Practicing business law for many years, I often encounter situations when a party to the agreement thought that his rights were duly protected for years while it was not so and he was deprived of basic legal remedies. In this article I am reviewing the common terms and conditions of a non-disclosure agreement (NDA), the mandatory and desirable ones.

First, it is important to describe in detail the subject matter of the agreement, i.e. what you want to keep in secret. If the agreement has a very broad general definition of what must be protected, such as “any and all” type of description, it will not be enforceable. Not all information is considered confidential and therefore protectable under the law. Contracts between the parties can add to the existing law, but they cannot override it. Make sure your agreement is nor contradictory to the existing law and policy.

Define the territory of the agreement – whether the non-disclosure is intended to be worldwide or within a particular territory.

The time period – is it perpetual or for a certain period of time. If the demand is unreasonable, considering the objective interests of the business, the court will not enforce it.

Usually NDAs state that the recipient of the information shall not disclose it. It is good to add that the recipient will utilize the same methods of protection as the grantor does or not less than the recipient uses towards its own confidential matters. Sometimes it may be worth it to list the exact action the recipient shall take to prevent inadvertent disclosure.

It is also important to state all authorized uses of the information considering the present circumstances as well as the possible future ones.

In addition to listing what a party should and should not do with the confidential information, you should also state what consequences would be incurred in case of a breach. Financial compensation may not be enough to cover all damages in case of the leak. The party may want to have the right to request a special performance (to make the other party do or refrain from doing something). And of course, indemnification clause, which should be beyond of ‘who reimburses whom’ in case of the breach or litigation. It should sate all possible circumstances under which the party may be entitled to indemnification.

Due to the development of technology nowadays the boundaries between territories are disappearing; the parties may be located in different countries, cities, continents and work on the same project. Therefore, it is important to agree on the jurisdiction and forum in case of the dispute. If a few years ago this clause was considered a boilerplate provision, presently it became quite essential.

The more comprehensive your NDA is the better you’re protected. If you intend to derive any value from your trade secret, this is not a place to cut short.

 

 

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