Non-Disclosure Agreement (NDA) Drafting

Different Type of NDA

There are basically 3 types of NDAs, and these are discussed below:

i. Unilateral NDA

In this, there will be two parties involved, where one party to the NDA discloses particular information to the other party, on the expectation and agreement that this shall not be communicated or disclosed further than this agreement formed between them.

ii. Bilateral NDA

In this, again, there will be two parties involved in the agreement, and both these parties will disclose information to each other and agree to not disclose this shared information with a third party or anyone outside the agreement.

iii. Multilateral NDA

In this, there will be three or more parties involved, and out of this, one party discloses the information that is confidential to other parties and agrees that such information shall not be shared with any other person or party falling out of such agreement. With a multilateral NDA, the need to form different unilateral and bilateral NDAs shall be eliminated.

When does NDA become useful?

There are multiple situations or scenarios in which NDAs come in handy and can be adopted. This would include:

• When forming a business deal
• When advice is taken from an expert in the event of researching a new product
• Beginning a new project for the company
• Checking on the possibility of making an investment possibly with another party
• When employment is being provided
• When an employee or candidate is signed for a sensitive and confidential project
• When dealing with important, confidential, and sensitive information pertaining to a particular client
• When there is a need to discuss confidential or secretive data with a third party.

This list is not a conclusive one and can have many more situations that can be included as these are the common scenarios that we can find.

Legally Binding and Stamping of NDA

NDA, or the Non-Disclosure Agreement in India, is a legally binding contract and is regulated by the Indian Contract Act of 1872. It is also recommended to be stamped or made legal by preparing the final draft on the stamp paper. The value of the stamp paper shall be determined on the basis of the statement in which it is executed. For this, the official website of the State Government shall be accessed.

This is not mandatory but can be printed on non-judicial stamp paper or e-stamp paper and signed in the presence of proper witnesses. It should also be notarized and it should be noted that the NDA can be printed on the letterhead of the company also.

The motivation and the signing in the witness’s presence are not mandatory but shall be done to put at bay any inconvenience and ensure further validity along with the enforceability of the same. This will give the agreement more validity and enforceability in the Court of Law.

In the case of an NDA which is signed in the presence of the witness, the limitation period will be 12 years for bringing in a claim in the Court of Law regarding the breach of any clause of the agreement. However, if the same was signed out of the presence of the witnesses, the same limitation would be cut down to 6 years.

Breaking the NDA

Any penalties or fines which may arise or may be levied on the breaking of any terms as per the NDA will generally be specified in the same. And if it is not specified then the person who breached the agreement shall be taken to court or be sued by the other party for misappropriation.

Extension of NDA

No law in force is providing the specified time limit for the NDA and it can be seen that in general, it extends to a period of 2 to 5 years. But at times for protecting trade secrets, the NDAs can also be entered into on a permanent basis. And if by any chance the confidential information in the NDA gets revealed to the public the validity of the NDA comes to an end.

Clauses in NDA

• The time frame of the NDA is the time period for which the NDA is being made by the parties, making it clear to the parties the time or extent to which they should be holding the information, like a secret, would be provided. The NDA, which is formed to restrict starting a business, trade, or employment, cannot be put into effect for an indefinite period, which is not an admissible one.
• Confidential Information, which is covered in the NDA, is one clause that forms the NDA. It is mostly explained in schedules and attached to the notices that are sent via email and it will be specified in the agreement.
• Duties and Responsibilities held by parties to the NDA where it give clarity to both parties on what is expected from them and the objectives they should meet.
• Consequences or the fines or penalties which may arise from the breaching of any clauses as given under the NDA. This will make it easy for the other party to take the breaching party to court with evidence clearly stating what was expected.
• Dispute Resolution clause explaining the possible resolution or method for resolving any disputes or conflicts that are arising between the people.
• The jurisdiction clause specifies the courts of the city which can be approached in case of any conflict or dispute that is arising.