A non-disclosure agreement (NDA) also popularly known as secrecy agreement or confidentiality agreement is a legal contract between parties stating certain information is to be kept confidential and the extent to which its disclosure is restricted to third parties. A Non-Disclosure Agreement can be entered into with a company or a person. It includes business plans, strategies, trade secrets and other similar information as confidential.
Types of Non-Disclosure Agreement:
In an NDA the party who provides the information which is to be kept confidential is called the disclosing party and the party who is provided with the information is called the receiving party. These are three types of NDAs:
Unilateral: A Unilateral NDA can be simply understood as one-way NDA which states that only one party discloses secret information to other party and requires that information to be protected from disclosure.
Bilateral: A bilateral NDA involves two parties where both parties disclose their secret information to each other.
Multilateral: An NDA is said to be multilateral when at least one of the parties discloses information to two or more parties and anticipates the protection of that information.
Elements in a Non-Disclosure Agreement
Below are the necessary elements in an NDA:
Confidential information: The most important element of an NDA is the information which is to be kept confidential.
Disclosure: There should be a clause which specifies the purpose for which such information is to be used and to whom it can be shared.
Term of contract: The agreement should specify the duration till which such information cannot be shared.
Remedies: The remedies which can be resorted to in case of breach should be provided.
Jurisdiction: The agreement should specify the courts of which city shall have jurisdiction or where such a case shall be adjudicated in case there is a dispute.
Is a Non-Disclosure Agreement legally binding?
An NDA is a legally binding contract as per the Indian Contract Act, 1872. It is however suggested to stamp the agreement to ensure its enforceability and validity.
Is it compulsory to print an NDA on a stamp paper?
No, it is not compulsory. NDA can be printed on the letterhead of a company and signed by the parties on both sides of each page. However, if you want to stamp your NDA then get it printed on a non-judicial stamp paper or e-stamp paper.
Notarizing and NDA - Is it a Compulsion?
No, it’s not mandatory. However, to ensure the validity and enforceability of the NDA parties may choose to have witnesses sign the NDA.
Registration of NDA - Is it a Compulsion?
Even the registration of NDA is not compulsory but registration should be preferred so that the validity can be proved.
Incase of Breach of an NDA
Usually, the penalties and the consequences are provided under the NDA if it is not provided then the person who breaches such a contract shall be subject to misappropriation under the Indian contract act.
Usual Period for an NDA
There is no such fixed or specified period. Usually, an NDA lasts for around 2 to 5 years. Many corporate entities enter into an NDA which last permanently so as to protect their confidential information and trade secrets.
Need for an expert to draft an NDA
The main problem of an NDA is to ensure all important aspects have been covered or not. A poorly drafted NDA causes a lot of problems as the contents are not clear and could lead to huge trouble hence consulting an expert is better than copying one which may land you in trouble in future.
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