The sample non-disclosure agreement seems to only be applicable to companies. I'm a sole trader. Can I use it?
Yes - there are alternative parties clauses for individuals (sole traders) and partnerships.
What sorts of information, exactly, can be protected by this non-disclosure agreement?
In line with standard drafting practice, the NDA uses a defined term, "Confidential Information", to describe the information that is the subject of the agreement. The definition is flexible and you can adapt it to cover whatever information you want covered, although non-disclosure obligations in relation to some categories of information, such as information in the public domain, may be unenforceable. The three suggested categories under the NDA are as follows:
- First, information supplied that is marked as confidential, has been described as confidential or should have been understood to be confidential.
- Second, the terms of the NDA.
- Third, any specific information listed in the NDA.
Other possibilities might include "information disclosed by X to Y during the meeting taking place on Z" or "information disclosed by X to Y in an email titled W and dated Z".
This document seems rather long for a "standard" confidentiality agreement. Why is it 6 pages long?
After you have removed the cover page, deleted the guidance notes and deleted any of the optional provisions that you do not require, the document should be 3 or 4 pages. It can then easily be reduced to 1 or 2 pages by changing the font and formatting.
What basic obligations does this place upon the party to whom the information is given?
There are 4 basic obligations. First, the recipient of the information must keep it confidential and not disclose it. Second, the recipient must use at least reasonable security measures to protect the confidential information. Third, the recipient must act in good faith in relation to the confidential information. Fourth, the information may only be used for a defined purpose. These basic obligations may be made subject to exceptions.
Can information supplied under this agreement be disclosed to the recipient's legal advisers?
Text is included to cover this eventuality. Rights to disclose to advisers (and others) may be made subject to the adviser having a professional obligation to keep the information confidential, or to the adviser entering into separate confidentiality undertakings.
We are disclosing information to a potential business partner. We don't want him to pass the information on. Also, we don't want him using the information in his own business. Does the NDA prohibit this sort of thing?
The NDA employs the concept of a "permitted purpose". For example, you might define the permitted purpose under the NDA as "considering the possibility of, and negotiating in respect of, an investment in XYZ Ltd". The person receiving the information undertakes not to use the information for any purpose except the permitted purpose.
We will be giving certain information to an associate, who will need to pass that information on to certain others. But we don't want it going any further. Does the NDA cover this?
There are two clauses that are relevant here. First, the NDA provides that the confidential information may be passed on to another where the express consent of the discloser has been obtained. Optionally, such disclosures must be under conditions of confidentiality no less onerous than those contained in the NDA. Second, where you can identify in advance the classes of person to whom the information may be disclosed, then these can be listed in the agreement. You may specify that such persons must be bound by a written agreement or professional obligation to protect the confidentiality of the information.
What exceptions to the basic confidentiality obligations are included in this agreement?
Exceptions listed in the agreement cover: information known to the recipient before disclosure; information that is or becomes publicly known, unless the recipient is at fault; and information obtained from a third party where there was no obvious breach of confidence.
There is also the usual exception for legally-mandated disclosures and similar.
What is the function of the indemnity that is listed in the contents?
This simply provides that, in the event of a breach of the agreement by the recipient of the confidential information, recovery is on an "indemnity basis" – this generally means more losses can be recovered than if the usual measure of damages for breach of contract is applied.
What happens to my confidential information held by the other party after the agreement is terminated?
Under the suggested (optional) clauses, that other party may be obliged to return or destroy media holding confidential information, and to delete the information from its computer systems, within a defined period. Exceptions may be made: for example, for documents that the other party has to retain for legal reasons. The scope of the exceptions will usually depend upon the scope of the definition of the confidential information.
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