An NDA (Non-Disclosure Agreement, or Confidentiality Agreement) identifies the non-public domain information that each party proposes to share with the other party or parties, specifies the purpose or purposes for which the other party or parties may use that information, and confirms that the information may not be disclosed to any third parties (possibly with certain exceptions). NDAs are commonly used when a party wishes to disclose confidential information to another party in anticipation of some form of business transaction or arrangement, and if the transaction or arrangement goes ahead then the NDA is normally superseded by the confidentiality obligations in the final agreement.
Issues to consider include:
- Has the information that is to be treated as confidential been adequately identified? Does the information need to marked as “confidential” in order for it to benefit from the NDA? What about information that is disclosed verbally in meetings or over the phone?
- What information is deemed not to be confidential, eg because it is already in the possession of the receiving party, or the receiving party acquires it independently from the disclosing party?
- Has the purpose or purposes for which the receiving party may use the information been adequately defined?
- Other than its employees, is the receiving party entitled to disclose the confidential information to any third parties, such as its group companies, contractors, professional advisers? Does the receiving party need to do anything before disclosing confidential information to third parties, eg ensuring that the third party are themselves subject to confidentiality obligations? Is the receiving party directly responsible for any disclosure by third parties?
- What is the duration of the NDA? Can it be terminated by a party? How long do the confidentiality obligations themselves continue?
- If entered into in expectation of an on-going relationship, should the NDA deal with the solicitation (poaching) of one party’s employees by the other party?