Non Disclosure Agreement (NDA)

A Non-Disclosure Agreement (NDA) is a legally binding contract between two or more parties, which outlines confidential material, knowledge or information that the parties wish to share with each other for certain purposes, but wish to restrict access to or by third parties. NDAs are commonly used in business, employment, and legal contexts to protect sensitive information from being disclosed to competitors or the general public.

1.Unilateral NDA

When one party discloses confidential information to the other party with an expectation that it will not be disclosed to anyone outside the agreement, it is a Unilateral NDA.

2. Bilateral NDA

both parties share confidential information and pledge to maintain its confidentiality, refraining from sharing it with any third party or individuals not party to the agreement.

3. Multilateral NDA

In a Multilateral NDA, three or more parties share confidential information while ensuring it remains within the agreement, eliminating the requirement for separate Unilateral and Bilateral NDAs.

 

NDAs are useful in various situations such as:

1. Forming a business deal
2. Seeking advice from an expert during research for a new product
3. Starting a new company project
4. Evaluating the possibility of investing with another party
5. Providing employment
6. Signing an employee for a confidential project
7. Dealing with sensitive information related to a particular client
8. Discussing confidential data with a third party
9. This list is not exhaustive, and there may be more scenarios in which NDAs can be applicable.

Non-Disclosure Agreement (NDA) is a legally binding contract governed by the Indian Contract Act, 1872. It is highly recommended that the NDA is stamped or legalized by preparing the final draft on stamp paper. The value of the stamp paper should be determined based on the statement in which it is executed, and the official website of the State Government can be accessed for this purpose.

Although not mandatory, the NDA can be printed on a non-judicial stamp paper or an e-stamp paper and signed in the presence of proper witnesses. It should also be notarized, and it can even be printed on the letterhead of the company.

While it is not mandatory to sign the NDA in the presence of witnesses, it is highly recommended to ensure its validity and enforceability in a court of law. This also helps avoid any inconvenience that may arise in the future.

In case an NDA is signed in the presence of witnesses, the limitation period for bringing a claim to the court regarding the breach of any clause of the agreement is 12 years. However, if the NDA is signed without witnesses, the same limitation is reduced to 6 years.

The Non-Disclosure Agreement outlines the penalties or fines that are imposed in case of a breach of its terms. If such penalties or fines are not specified, the party that breaches the agreement may be taken to court or sued by the other party for misappropriation.

There is no specific time limit provided by the law for NDAs in force, but typically, they last for 2 to 5 years. However, in some cases, NDAs can be entered into permanently to protect trade secrets. If the confidential information specified in the NDA is revealed to the public, the validity of the NDA will be terminated.

1. The timeframe of an NDA is the period of time during which the parties are obligated to keep the information confidential. NDAs that attempt to restrict trade or employment cannot be indefinite.
2. Confidential information is a key element of the NDA and is typically outlined in schedules or attachments to the agreement.
3. The NDA specifies the duties and responsibilities of the parties involved, outlining the objectives they should meet and what is expected of them.
4. The NDA outlines the consequences or penalties that may result from breaching any of the clauses, making it clear to both parties what is expected and what will happen in the event of a breach.
5. The dispute resolution clause explains the methods by which disputes or conflicts can be resolved between the parties.
6. The jurisdiction clause specifies which courts can be approached in case of conflicts or disputes.

1. Protects confidential information: NDA provides a legal framework to protect personal data shared between parties, ensuring that the information is not disclosed to third parties without the consent of the disclosing party.
2. Increases trust and confidence: Signing an NDA creates trust and confidence between parties, allowing them to share sensitive information knowing it will not be used against them.
3. Preserves trade secrets: NDAs can protect trade secrets and intellectual property, preventing competitors from gaining access to valuable information that could give them an advantage in the market.
4. Encourages innovation: NDA encourages innovation by enabling parties to share ideas and collaborate on new projects without fearing their confidential information being misused or stolen.
5. Helps in dispute resolution: An NDA specifies the legal remedies that can be taken in case of a breach, making it easier to resolve disputes between parties.
6. Increases bargaining power: NDA can provide a party with bargaining power during negotiations, as they can demand that their confidential information be protected before sharing it with the other party.
7. Ensures legal protection: By signing an NDA, parties provide that their confidential information is legally protected, and they have a legal right to seek compensation if their confidential information is misused or disclosed without their consent.