Non-Disclosure Agreement

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INTRODUCTION

A Non-Disclosure agreement, as the name might suggest, is a form of a binding legal contract that restricts a party from disclosing or disseminating any form of information. The agreement makes grants such information a privileged status which the receiving party shall only disclose after receiving assent from the disclosing party or owing to legal compulsion or based on any clause in the agreement which allows them to do so.

It is extremely important to have Non-Disclosure Agreements, especially for start-ups to protect their idea and business specialisation and strategy for attaining market supremacy.

A NDA is a tailored legal document which is drafted based on needs of the parties.

PROCESS

There are different types of NDAs based on their contents, purpose and objectives. However, a few basic elements that are must in all NDAs are as follows:

  1. Identification of Parties: the normal disclosure agreement must begin with identifying the parties to the contract. It should clearly specify which party is the disclosing party and which is the receiving party. The identification of parties should be detailed and should include details like the registered office address, if any, and the business activity that the parties perform.
  2. Definition of Confidential Information: The agreement should also specify what all information is privileged and will be protected by confidentiality. This means it has to provide for the type and mode of information that would be covered, for example that received in written or discussed orally.
  3. Purpose: it should clearly define the purpose for which the agreement is being drawn. For example, discussions for executing start-up project.
  4. Exclusions: This clause provides for excluding information that would not be obligatory for the receiving party to protect. For example, that information which is readily available in the public domain, or which the party learn from legitimate sources, apart from the disclosing party.
  5. Obligation: It should provide for the binding obligation on the receiving party to not disclose information protected by this agreement. It should also list out events in which such obligation would be relaxed. For example, disclosing on need to know basis to employees or other associates for performance or execution of activity.
  6. Tenure: It should also specify the duration for which the agreement would remain in force. It should specify if otherwise. For example, the agreement will terminate only upon receiving a written request from the receiving party, which would be subject to the acceptance of the disclosing party.

This clause protects the NDA if any of its clause(s) is found to be invalid by a court of law. Which means that in such an event the rest of the agreement would be viewed in its essence and objective, and would remain intact, having the same effect, except for such invalid clause.

ADVANTAGES / FEATURES

  1. It helps protect privileged information
  2. It facilitates free communication as the parties are not hesitant to disclose, fearing dissemination of their privileged information
  3. It helps protecting market supremacy strategies, ideas, products, innovations etc.

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