Establishing confidentiality in contractual relationships

FUNGAI  CHIMWAMUROMBE AND MARTIN MASITERA

In the course of business transactions and many other contractual relationships, parties desire to have certain sensitive information that they divulge for the progress of the intended business to be kept in confidence by the reciprocating party.

This information may range from trade secrets, intellectual property, strategies and financial data. One way to secure and protect such sensitive information shared by parties is through a non-disclosure agreement.

What is a non-disclosure agreement (NDA)?

A non-disclosure agreement better known as an NDA can essentially be described as legal documentation that is entered into and signed by parties agreeing and intending to fulfil reciprocating obligations to keep private and confidential the sensitive information that is shared when the parties intend to conduct business together.

There are three main categories of non-disclosure agreements and these are unilateral NDAs, bilateral or mutual NDAS and multilateral NDAs.

Unilateral NDA – This type of NDA is mainly drawn up in cases where only one party is divulging sensitive information to the other party. If an experienced craftsman is sharing a secret with investors, this is the type of agreement that they might need drawn up. This protects him from the investors sharing the information or using it for their own good without his further involvement.

Bilateral/Mutual NDA – This form of NDA is invoked when both parties to the agreement disclose confidential information. This protects both parties from the unfortunate and unwanted sharing of information by the other party.

Multilateral NDA – In this agreement, there are more than two parties who intend to share sensitive and confidential information and the same clauses and obligations invoked in the other forms of NDAs are also included but binding all parties involved.

What are the most common scenarios that involve the drafting and signing of an NDA?

In this day and age most business whether multinational or small enterprises have developed close to unique trade secrets and strategies that they definitely do not want in the public forum if they are to maintain a monopoly. However in day to day transactions, these business are likely to want to partner with other businesses or investors to further said businesses.

The scenarios include but are not limited to employment contracts, joint venture agreements, mergers and acquisitions or even when hiring consultants such as software developers, auditors and other service providers to look into and provide assistance for your business.

How is an NDA drawn up and what does it include?

In most cases it is advisable to consult legal practitioners of adequate skill to draft a non-disclosure agreement for you. It has since been established that the import of a NDA is protect information of utmost importance, and such a task cannot be left in the hands of just anybody. Your attorney will draft the NDA including certain clauses to protect your information.

Some of the key clauses include;

A definition clause that describes exactly what the parties consider as confidential information that will be shared between them;

An obligations clause to set out what is expected of the parties receiving the sensitive information that is regarded as confidential;

An exclusion clause that speaks of what information must not be regarded as confidential since it is already part and parcel of publicly available information;

A remedies for breach clause to make sure that the parties agree as to what course of action is to be taken by the aggrieved party in the case that the said information has been shared without consent to the detriment of the divulging party.

What are the benefits of a Non-Disclosure Agreement?

Entering into a non-disclosure agreement has benefits and protection for all parties. The first benefit is that all parties are made aware of what is considered as confidential. This helps to clear the air and avoid confusion when information is shared.

Secondly, protection of trade secrets and strategies is bolstered since enforcement of a written contract is easier than oral arrangements. This also helps maintain transactional relationships as every party is ascertained of the protection they have under a non-disclosure agreement.

Lastly if parties are assured of protection of their information, it ensures collaboration and the partnership is most likely to succeed.

In summation, it is prudent for businesses to protect their secrets through NDAs as it gives them ensured transactional advantage and they have written agreements to fall on if the deal falls through.