Full Form of NDA

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Blog Author :

WallStreetMojo Team

Edited by :

Ashish Kumar Srivastav

Reviewed by :

Dheeraj Vaidya, CFA, FRM

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Full Form of NDA - Non-Disclosure Agreement

The full form of NDA is a Non-Disclosure Agreement. It is defined as the legal contract of a confidential agreement entered between two or more parties (covered under the Indian Contract Act, 1872) to restrict the parties from disclosing confidential and proprietary information shared by the contracting parties during the validity of the agreement.

Table of contents

Types

Three types are in practice currently:

Types-of-NDA
  1. Unilateral Agreement
  2. Bilateral Agreement
  3. Multilateral Agreement

How to Write the Non-Disclosure Agreement?

Steps-to-write-NDA

One can follow certain steps to write the non-disclosure agreement.

  1. Identify the requirement of NDA

    The first step is to identify the requirement of NDA and whether, for the particular agreement, the party will disclose any confidential information that the company doesn’t want to share with the public.

  2. Identify the confidential information that is going to be shared

    After identifying the need, the party needs to identify the confidential information that will be shared while performing the contractual obligations and activities. During the identification, the party should ensure that such information is not to be shared before entering into the agreement and attesting to the agreement. The sharing of information can cover many prospects. Such information should not be easily available to the public because such will not be considered confidential.

  3. Draft an agreement

    After these identifications, the parties can draft an agreement by titling the agreement as a 'Non-Disclosure Agreement.' In the title, the agreeing party's name must be mentioned and must insert the reason for such agreement, i.e., business purpose, etc.

  4. With the title, clause are inserted

    With the title of the document, the clause must insert that 'during the proposed transactions the parties may disclose some information, documents, and materials which are of confidential and proprietary nature to be inserted.

  5. Terms & Conditions

    One should mention the terms and conditions related to the contract, which cover the conditions that the confidential information is not to be shared further or reproduced if necessary, the conditions in case of breach of contract, etc. The agreeing parties should ensure that one should mention all the relevant conditions and clauses in para.

  6. Name & designation of the authorized/signing authority

    And at last, one should mention the name and designation of the authorized/signing authority. Those authorized persons should attest to the agreement.

Example of Non-Disclosure Agreement

Agree between a company and an employee to prevent data leakage of sensitive business information.

Solution:

Employee Non-Disclosure Agreement

The employee non-disclosure agreement is entered by and between the ABC Company and Mr. Ashish, an employee of the company.

During the employee's duties, the company may disclose to the employee certain confidential and propriety information that is sensitive and generally not available to the public. As per the agreement, the parties agree as follows:

​Clauses of NDA

clause-of-NDA
#1 - Definition/Description of Confidential & Propriety Information

This clause is one of the most important clauses where the matters described and classified as confidential are to be covered by the non-disclosure agreement. The disclosing party must ensure that all prospects of communication and the information are covered in the clause, leaving no loophole for the other parties to exploit.

#2- Parties included in the Agreement

This clause represents the parties covered in the agreement and states that the parties will share some confidential information during the business.

#3 - Terms & Validation of the Contract

This clause represents the terms that must be followed and provides the duration for which the agreement will be enforceable. It must consider that unrealistic and unjustified time may not be acceptable to the jurisdiction.

#4 - Clause for Permitting use of the Information Shared & Prohibiting other uses.

This clause provides the area where such confidential information must be used and prohibits the reverse engineering of the demo of the product.

In this clause, the parties provide that in case of a legal obligation, parties may have to disclose confidential information covered by the NDA, which will not be considered a breach of the agreement.

#6 - Jurisdiction & Remedy in case of Breach of Contract

This clause will provide the law which will cover the following agreement as well as the court or jurisdiction, which will cover any dispute.

This clause will also include the remedies acceptable to the disclosing party in case of breach of contract.

This clause will provide the other party to recover any legal amount spent on enforcing the agreement.

#8 - Destruction or Return of the Material & Information provided in the act to fulfill the contractual obligation.

Difference Between Non-Disclosure Agreement and Confidentiality Agreement

  1. One must use non-disclosure and confidentiality agreements to protect private or confidential information. It is slightly different in both terms in practice.
  2. One must use a confidential information agreement when it is a higher degree of information.
  3. One must use a non-disclosure agreement between third-party contracts. That party could be a vendor, debtor, or any other party.
  4. A confidential information agreement is used mainly between employer and employee.

Benefit

  • A non-disclosure agreement has a different clause that protects confidential information. It protects intellectual property rights, trade secrets, and other confidential information.
  • Party has legal rights and has legal protection of information. In case any party breaches the NDA second party has the right to enforce the clause of the agreement and can receive monetary compensation.

Issues

  • One of the major issues is Defining Confidential Information in NDA- In the non-disclosure agreement, it defines confidential information and what information will be available for parties. In this, there are two approaches in one approach. Everything the party is sharing confidential information unless otherwise agreed in terms. In the second approach, parties must decide what information is confidential at the time of disclosure.
  • Parties have to decide what one will share information, and if that information is known to parties, they will exclude it from the agreement.
  • Breach of Contract- In a contract, parties have to decide that if any party breaches the contract or discloses the information to the third party without permission, then what will be the actions the second party will take? Whether the party will get compensation for the breach, there will be an issue of how much the party will recover and whether only monetary compensation is enough for a breach of contract.
  • Residual Clause- In NDA, this clause deals with the transfer of intellectual property information. This clause will decide whether the receiving party will be allowed to use the information learned in IP or to what extent they can use it.
  • When preparing the NDA, they have to consider the residual clause carefully. It can prevent a party from developing the IP they received from a party, which may cause a loss of opportunity in the market.
  • Other issues are waiver of contract, injection clause, and the party can decide litigation of dispute. And which law governs this NDA.

Conclusion

A non-disclosure agreement protects the information on intellectual property, trade secrets, and other confidential information. This agreement has different clauses to support the agreements. When preparing this agreement, parties must carefully prepare the conditions so the other party couldn't use those clauses wrongly. This agreement gives a legal right to protect the information.