Why sign a confidentiality agreement?

Confidentiality agreement, non-disclosure agreement, NDA… As they are called. In fact, it is the same document that is concluded in order to protect certain information from its illegal disclosure or use. The title of this document has absolutely no effect. The main thing is that its content meets the requirements of the law and can really protect the interests of the individual.

What provisions should be included in a confidentiality agreement and how to make it work for you will be discussed in this article.

Goal

Let's start with what non-disclosure agreements are for. The purpose of concluding confidentiality agreements is to protect one's own work, experience, achievements, information that the company receives from customers, etc. Employers or hired customers do not want to share their professional secrets without security guarantees. And this is normal.

It is in such cases that a non-disclosure agreement (NDA) or confidentiality agreement is concluded.

Parties

As a rule, the initiative to conclude an NDA belongs to the company that hires the employee. Although there are cases when a person who is the author of a particular development or product, initiates the conclusion of such an agreement in order to preserve the rights to their own development in the process of cooperation with the customer company.

Depending on who is the initiator of the agreement, the parties can be conditionally called "Disclosing Party" and "Receiving Party". However, to facilitate the perception of the text of the contract, we recommend that you specify the simplest possible name of the parties. It is possible to name the parties similarly to the main contract in addition to which the NDA is concluded. Then the parties to the contract may be the Customer, Contractor or Customer, Contractor or simply "Party 1" and "Party 2". The name of the parties does not affect anything, the main thing is that it was easy to read.

If you need advice on developing a corporate agreement, contact us for help

Prerequisites for concluding a contract

In order to protect restricted information, you must first grant this status. It is up to the individual to decide which information is confidential. However, there are limitations and not all information can be classified. For example, information about the state of the environment or product quality cannot be confidential.

Similarly, confidential information that is publicly available or that a person is required to disclose by court order cannot be classified.

In order for you to claim that any information is confidential, a complete list of such information should be identified and recorded in a separate document. This may be a trade secret provision or a procedure for using confidential information. Such documents should also describe the detailed procedure for working with confidential information: how it is transmitted, who and how gets access to it, where it is stored, etc.

MustHave or which items are key in the NDA

The subject of the contract or information that is prohibited from disclosure.

Quite often in such agreements the general expressions "technologies, processes, recipes, etc., which may become known to the person використову" are used. This wording is very abstract and in the case of litigation may not work in your favor. It will be difficult for you to prove that the disclosed information is part of confidential information and that there has been a breach of contract. If it is possible to define a clear list of information that needs to be protected, do so. Otherwise, it may be difficult for you to prove what information your unscrupulous counterparty had access to and that it does fall under the signs of confidentiality.

Obligation

Formulate correctly what exactly you forbid the person.

Example of incorrect wording: "A person undertakes to maintain the confidentiality of confidential information and not to disclose it." Why is this wording not appropriate? Here you oblige the person only not to disclose information to others. If, for example, a person decides to open his own company and uses the information obtained in his own products, such actions do not violate the agreement. After all, a person does not disclose any information, but uses it in his own activities.

Therefore, the formulation of obligations in the NDA should be approached very carefully, having previously determined what actions you want to protect yourself from and what information to keep secret.

Law and court

This is relevant for contracts with foreign counterparties. Then you can and should choose the court where the disputes will be considered, and the law under which this dispute will be resolved.

It is important to first analyze the relevant rules of law and make sure that the provisions of your contract comply with the law, especially if you choose the law of another country.

Responsibility

Often only liability forces a person to abide by the provisions of the contract. In no case do not write in the contract: "The parties are responsible in accordance with applicable law." There will be no responsibility, no motivation to fulfill the agreement.

It is also common for the parties to the agreement to state that the person who disclosed the information is obliged to compensate the damage caused as a result of such disclosure. In practice, such damage can be difficult to determine, let alone document.

A very common sanction is a fine. The size of such fines are quite high. However, the fine is not always fair to the counterparty, because it happens that it is set for a formal breach of contract, which in our reality is quite common. For example, you disclose information to an employee with whom you do not have an employment relationship. If the NDA has the right to disclose information only to employees, then you are formally violating the contract and must pay a fine. In such cases, you need to either take the fine, or prescribe in more detail to whom and what you can disclose.

Contract term

If you decide to include the terms of confidentiality in the main contract, then these provisions should be provided for separately. As a rule, confidentiality provisions are valid for 1, 3 or 5 years longer than the main contract.

Here is an example of why this is important. You have disclosed certain confidential information to a person and have not even begun to cooperate, and he decides to terminate the main contract. If such a possibility is provided by the contract, then along with the termination of the contract, the provisions on confidentiality will cease to apply.

To avoid such unpleasant situations, we advise you to enter into a separate agreement, which will specify the list of confidential information and all conditions of its use.

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Instead of conclusions. Whichever party to the contract you are, be sure to read its terms before signing. Especially if you are not the author of the document. The conclusion of a confidentiality agreement is now very common, but this does not mean that its terms should be clearly illegal.

Today, the practice is relevant when lawyers not only prepare drafts of such agreements, but also analyze such projects for compliance with the interests of the client. This is true if you are an employee or a contractor. So if you suddenly have such an agreement and you are hesitant to sign it, turn to professionals who will help protect you from litigation and space fines in the future.