Execution of Non-disclosure Agreement or Data Confidentiality

A Non-disclosure Agreement (NDA), also known as a Confidentiality Agreement (CA), is a legal contract between at least two parties (discloser, who discloses and recipient, who receives the confidential information), primarily executed to safeguard confidential material, knowledge, or information that the parties wish to share with one another for certain purposes. An NDA is a contract and creates a confidential relationship between the parties to protect any type of confidential and proprietary information or trade secrets.

A very critical part of NDA is the definition of confidential information. A NDA contains the purpose for which the NDA was entered into and the reasons behind such disclosure of information as these will ensure better protection of the confidential agreement and better enforcement of the NDA.

NDA may be for a specific period or forever (ie, as long as such confidential information does not enter the public domain). The validity period of a NDA is decided by the parties to the NDA and is mentioned in the NDA.

A well drafted NDA contains the clauses covering the eventualities if any of the parties breach the terms of the NDA, thereby ensuring that the party breaching the NDA will face the consequences of such act.

Execution of NDA is the most common practice in businesses to ensure confidentiality of the information shared with vendors or the employees and hence it is important to ensure that NDA so executed is legally enforceable and has all essential clauses of a valid contract.

With employees, execution of NDA is important because during the course of employment, they get access to critical trade-secrets and confidential information that the employer would not like to be shared by any third party.

Mere signing NDA is of no use till NDA is drafted well and is capable of being enforced in a court of law. In order to enforce the contract, it will need to be presented in court to prove the fact that you had entered into it legally, and to prove the validity of the terms of the contract.

Some of the important considerations to have a legally enforceable agreement are as below:

• According to Indian Contract Act, 1872, for an agreement to be legally enforceable, it shall be executed by parties who have reached the age of majority and have sound mind, there has to be lawful object, consideration, free consent, intention to create a legal relationship, etc. In case any one or both parties are companies, registration of such company (ies) is important.

• Stamping of the agreement for `20-200 is important for an agreement to be accepted in Court.

• Further, a NDA may be registered as per the Registration Act, 1908 as Registration helps a long way in proving the accuracy of the contents of a particular document.