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What is a Non-Disclosure Agreement (NDA)?
A Non-Disclosure Agreement (NDA) is a contract in which two parties exchange sensitive and confidential information.
By signing an NDA, it's expected that the individuals involved will keep the information they discuss private from third parties. As such, the contract aims to protect the person who’s disclosing confidential information (i.e. the disclosing party) from being at a competitive disadvantage caused by the misuse of that information.
LawDepot's Non-Disclosure Agreement template is unilateral in the sense that the information is passed in one direction only—from the owner of the information to the receiver.
Some situations, such as joint venture or partnership formation negotiations, require a mutual exchange of confidential information. In this case, each party can create a unique document for the other to sign.
Confidential information is information that is not common knowledge or known to the public at large. It’s important to specify exactly what type of information you want to protect in your NDA so that everyone is clear about what would be considered a breach of confidentiality.
Some general categories of confidential information are:
- Data sharing: this might include customer data such as names and contact details, purchasing and internet browsing history, GPS tracking information, and more
- Intellectual property: this can include any intangible asset that has commercial value, such as copyrights, patents, trademarks, and trade secrets
- Marketing, product, and service information: this might include any strategic functions of a business such as marketing plans, production processes, prices, and more
- Business operations and accounting information: this can include intangible business assets, such as information on vendors, staff, fixed costs, and other internal financial reports
Once you establish the subject matter of the confidential information, the disclosing party must describe how the receiving party is permitted to use it. For example, an employee would be permitted to use the employer’s customer lists in the course of their employment but not for any reason unconnected with that role.
The receiving party agrees to use the information only for the purposes stated in the agreement and to indemnify the disclosing party for any breach of that agreement.
When should I use a Non-Disclosure Agreement?
You may need a Non-Disclosure Agreement in situations involving the disclosure of commercially sensitive information, for instance:
- When an employee or contractor gains access to new information not covered in their original Employment Contract or Service Agreement
- When a company makes its financial accounts available to a prospective buyer during negotiations for the sale of the business
- When an inventor shows their invention to secure financial backing from a potential investor, but also needs to protect their intellectual property
In sum, you can use LawDepot’s Non-Disclosure Agreement template when you are serious about protecting your confidential information. In this case, the parties will have a contractual obligation to uphold the terms of the agreement.
Is a Non-Disclosure Agreement legally binding?
Yes, when executed properly, a Non-Disclosure Agreement is legally binding. The parties to the contract are held to Singapore’s Law of Contract.
A valid contract must include some consideration, which means each party receives some benefit from the agreement. So, for example, it may be difficult to enforce a new NDA against an existing employee if they don’t get a raise or a perk in exchange for the newly created obligations.
Also, an NDA will not be enforceable if the confidential information becomes publicly known (through no fault of the receiving party) because it can no longer be defined as confidential information.
For instance, imagine two inventors entering into an NDA with a potential investor. The investor agrees to keep the details of the invention confidential until they can begin manufacturing and selling the new product.
If one of the inventors gives away the secrets of the invention during an interview with a journalist, the information would be considered public knowledge, and the investor could not be held accountable by the inventors if that information is used by third parties.
Is an NDA indefinite or can it be terminated?
The obligations created by an NDA can last indefinitely or end on a predetermined date.
To specify an end date, consider when the relationship between the two parties ends or when the information no longer needs to be confidential because it will be in the public domain.
If a date is not specified, the information should remain confidential indefinitely.
It’s important to note, however, that trade secrets must always be kept as confidential information. These are considered valuable business assets essential to the competitiveness of the company and are generally protected by Singapore’s common law of confidence.
What happens when someone breaches a Non-Disclosure Agreement?
A Non-Disclosure Agreement acts as a strong deterrent for anyone who has signed one because of the legal action that can be taken if the confidential information is leaked.
If the NDA protected copyright, the disclosing party could start a civil claim (i.e., file a lawsuit) for copyright infringement. In this case, a court could order the infringing party to stop their behaviour, surrender any items that infringe on the copyright, and compensate the copyright owner for damages.
However, legal actions are costly and time-consuming. Instead, you may wish to resolve the dispute through negotiation or mediation. You can also include remedies for a breach of contract in your NDA, like requiring the receiving party to pay liquidated damages (a predetermined sum of money).