A non-disclosure agreement is a contract between two parties that governs how certain information concerning these parties should be handled. Usually, such an agreement will define at least the following:
- Which information is considered confidential?
- How should the confidential information be handled by the respective party?
- What is the liability of the party that fails to ensure confidentiality?
In this material, we shall examine what we consider to be the more important aspects of the non-disclosure agreement (NDA).
NDAs are common contracts in the Singapore corporate world. The yare often used to protect trade secrets and know-how and especially when companies hire employees or external experts to help in product development, marketing or any other important aspect of the business. Confidentiality may be arranged in a separate agreement or be incorporated as specific clauses I the content of another contract. The latter is often applicable to employment agreements.
Content of the NDA
A typical non-disclosure agreement starts with a definition of what information actually is considered confidential by the parties. A good practice is to include a comprehensive list of confidential material and information. You can use an appendix to the general agreement for this purpose if the list becomes too big.
The next part of the agreement should provide the obligations of the parties, namely what measures should be taken to protect the confidentiality of the information, what kind of disclosure is permitted and what is prohibited. You may choose not to include any specific obligations but to just restrict the lawful disclosure of information. An important part of this section of the agreement should be the term of the contract. It is important to provide a term of continued confidentiality beyond the duration of the non-disclosure agreement.
Commonly, the NDA will provide that disclosure of confidential information to selected individuals (e.g. employees, agents, officers, representatives etc.) to whom disclosure is necessary in the ordinary course of business, is permissible. A duty of confidence is may also be imposed upon the recipient in some NDAs.
It is also advisable to include contractual sanctions for the parties in case of breach of the agreement. This section should include what constitutes a fair remedy and what other consequences should the liable party suffer.
Lastly, the NDA may also arrange what will happen with the disclosed information after the termination of the agreement. In some cases, you can expect the other party to return all the documents containing the classified information but in other, you may request the reassure of the data.
What is an Unilateral Non-Disclosure Agreement?
An agreement is considered to ne unilateral when it provides obligations for only of the parties. In the cases of a standard unilateral NDA one party will be considered a recipient of the information and will agree not to disclose it to third parties. The other party is called the provider of the information.
If both parties exchange confidential information you should draft a bilateral agreement. Neither party should be allowed to disclose information to third parties without prior approval from the other signatory to the NDA. Bilateral non-disclosure agreements are often the norm in joint ventures, mergers and acquisitions and affiliate programs.
When the agreement includes more than two parties it is considered a multilateral non-disclosure agreement. This type of NDA eliminates the need for separate unilateral or bilateral NDAs between only two parties.
Do You Need a Written Agreement?
Absolutely. Although verbal agreements are also considered lawful contracts you should always persuade the signing of a written agreement.
Keep in mind that the Electronic Transactions Act of Singapore explicitly states that “where electronic communication is used in the formation of a contract, that contract shall not be denied validity”. This means that electronic contracts are valid and enforceable as long as they comply with the requirements for standard contracts. You can learn more about the validity of digital contracts in Singapore here.
What to Do in the case of a Breach of the NDA?
If you have a signed NDA and believe that your business has financially suffered due to the actions of the recipient of the information, then you can file a lawsuit for damages against the other party. However, unless you have provided for specific sanctions in the content of the contract you will bear the burden of proof in proving that you have suffered any loss of financial revenue or profits as a result of this breach.