Non-disclosure agreements also referred to as confidentiality agreements is a legally binding contract that is between two or more parties signifying an existing confidential relationship between the involved parties. Confidentiality agreements are used when a party wishes to disclose his own confidential information, and wishes to maintain the privacy of that information by protecting it, to another party, usually in the process of business negotiations. Thus, when the other party signs the non-disclosure agreement, he undertakes the obligation of not disclosing the confidential information according to the terms set by that agreement. The terms of such an agreement are presently detailed in 3 to 4 pages; however, it can also be 15 pages or more, especially when it covers patentable, developed technology. This analysis therefore discusses in details, the basic terms of a non-disclosure agreement and also the obligations and legal rights that are created under this agreement. It also discusses the legal provisions that can be adapted to specific arrangements and circumstances. It is a formal requirement of a confidentiality agreement that the terms be detailed as the parties will then have very reasonable expectations on the services that each of them is expected to perform as set by the agreement and the eventual consequences that one is to face if the expectations of the agreement are not effectively met (Thompson, 2013).
A confidentiality agreement usually arises between two companies who are about to engage in business transactions together, being companies, they are often restricted from the release of information that refers to any business process of the other party, that is considered important in the operations of the company. The obligations and duties, applying to both the parties to the agreement, that are created by a non-disclosure agreement to effectively govern the privacy of such confidential information include:
The precise definition of confidential information: the parties are obligated clearly to define the word confidential. This is majorly because, the party who is disclosing the information, which is confidential would most likely require that the definition be very inclusive, on the other hand, the recipient of the confidential information would require that the definition rather be narrow. It however a requirement that the definition provided be inclusive and clearly illustrates in-depth, the items that can be, according to the agreement, defined as confidential.
The obligation of maintaining confidentiality: The non-disclosure agreement must state in details, how the recipient is expected to handle the confidential information, and the failure to adhere to the terms and treat the confidential information as not being confidential contrary to the requirements will result to a breach of the confidential agreement. The typical requirements of this agreement include the recipient of the information restraining form disclosing the scope and object of the meetings and discussions with the other party. Further, restrain from disclosing the information to entities or persons other than agents or employees of the recipient without obtaining a prior written consent of the owner of the confidential information. Consequently, not using the information for other purposes other than the one specified and agreed upon by the parties. If the recipients agents or employees gains access to the confidential information, the owner of the confidential information will expressly want the recipient to acquire an agreement from the agents or employees of being bound by the confidentiality obligation, but under strict liability, remain fully responsible for the actions of his recipients.
Exceptions to the confidentiality obligation: non-disclosure agreements will normally exclude from the definition, certain information. Some of these exceptions are for instance, information that at the time of signing the confidentiality agreement was already in the recipients possession, information that the force behind its disclosure was a court order and information that has become or is public but through no action of the receiving party. The non-disclosure agreement should clearly specify the obligation of the recipient not to notify the party producing the confidential information of the courts order of disclosing the confidential information and partys rights of intervening with the aim of protecting the ordered release of its information.
Ownership of the confidential information: the disclosing the information is to require the recipient to acknowledge the fact the disclosed confidential information is the sole property of the party disclosing it and the disclosure does not convey any license, title or right in the confidential information to the recipient. Thus, this will lead to the prevention of any ambiguity when it comes to what rights, if any, the receiving party is entitled in the information. The transfer of ownership and rights will typically not be the subject matter of a confidential agreement, but it would be a joint venture or development agreement if the parties to the agreement decide to work and use the confidential agreement together. However, even if this happens, it may sometimes not be in the interest of the disclosing party if he transfers any portion of its rights of ownership in the information.
Miscellaneous provisions: generally, after spending a considerable amount of time in defining and negotiating the contents of the confidential agreement, including the obligations that the parties have of keeping the information confidential as intended, it is often very easy for the parties to omit the miscellaneous provisions that they typically find normally at the end of the non-disclosure agreement. The parties to the confidential agreement are always required to pay full attention to the prescribed law in the agreement that is intended to govern the agreement, the assignability of the obligations and rights and the procedure of resolving disputes under the agreement.
Term: the non-disclosure agreement is also required to specify the time span during which the disclosure of the confidential information and the span in which the information is to be confidentially maintained. These normally vary and there is no required specification of the exact dates. However, other agreements may specify the time period, for instance an agreement may provide that the period for disclosure be one year, but the obligation of maintaining the confidentiality of the disclosed information be a time span of two years after the end of the agreement. Thus, if the period of disclosure is specified, the owner of the information is to provide in the agreement, for the termination done by either party prior to the end of the agreements terms at any time. This gives the party disclosing the information the authority to terminate the obligations of disclosing the information if the party ceases to be interested in working with the receiving party (Thompson, 2013).
The consequences of the breach of a non-disclosure agreement are that, when a recipient breaches the obligations clearly set under a confidentiality agreement, the party is liable and thus subject to the available remedies to the owner of the confidential information. These remedies can be classified into monetary and equitable damages and reliefs respectively. However, an injunction can be issued against the confidant breaching the confidentiality agreement and thus prevents any further agreement breach (Thompson, 2013).The court can also opt to award for monetary compensation for the damages if the quantum can be quantified. It is often expensive and difficult to enforce a non-disclosure agreement; this is due to the necessary proof that is required to demonstrate a breach of the agreements terms by the adverse party. While an injunction prevents dissemination of the information by the recipient in future, it is however very hard to contain the information once its disclosure and therefore, quantifying the monetary damages becomes difficult to. This is because of the issues of enforcement and the advice that one might be given is for them not to enter a non-disclosure agreement or sharing of the confidential information with another party whom the disclosing party does not trust to maintain the confidential information (Guite, 2011).
In conclusion, non-disclosure or confidentiality agreements are a customary characteristic of both commercial and corporate deals. However, they usually contracted when there is a quick and decisive high pressure to act, for instance, where a buyer finds that they are in a competitive process. However, there other tips that one should follow and thus assisting them in ensuring that one does not act in haste and regret their actions in future. These tips include:
The careful and precise definition of the confidential information and this should be the information that has not yet been in the public domain.
Keeping track of the confidential information disclosed, the disclosing party should ensure that the obligations under the agreement of keeping the records confidential are intended for the keeping the information confidential within the scope of the process being undertaken.
Ensure the return of the information disclosed: the recipient should avoid obligations that require that the information be returned immediately and give oneself a reasonable period to comply with the provisions.
The disclosing party should also limit the duration for the recipients obligation and effectively manage the unauthorized access to the information by third parties (Guite, 2011).
Guite, P. (August 2011). Top ten to follow before signing a Non-disclosure agreement.
Thompson, J., R. (September 2013). Overview of Confidentiality Agreements. Barnes &
Thornburg, LLP 225 S. 6th Street, Suite 2800, Minneapolis, MN 55402, 612-367-8736
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