What You Should Check in Non-disclosure Agreement?

Last Updated at: May 28, 2020
Here you can check the non-disclosure agreement template
In April, 2020, The Kerala Government intimated the Kerala High Court about steps taken by them to ensure security of citizen-centric data during the COVID-19 pandemic. The Govt said that stringent provisions have been incorporated in the Non-Disclosure Agreement (NDA) with Sprinkler, the US-based tech giant, to ensure the same.


A Non-disclosure agreement (NDA) is an agreement governed by the Indian Contract Act 1872 under which two or more parties enter into a contract to agree not to disclose the Confidential Information specified in the transaction. The NDA enlists and mentions all the necessary pieces of information that are confidential, and its access is denied to any third party.

Types of NDA (Non-Disclosure Agreement)

  1. Unilateral NDA: When two parties enter into a contract and only one agrees to share confidential Information and also prevent others from further disclosing that Information to any other party.
  2. Bilateral NDA: Under this type of agreement, both the entering parties agree to disclose information to each other and prevent each other in further disclosing it to any other party not involved in the contract by either of the parties.
  3. Multilateral NDA: When three or more parties enter into the agreement and only one of them discloses the confidential information to both of the other parties and expects that the information is not further disclosed to any other party.

Get a non-disclosure agreement

Important points to keep in mind before reading a non-disclosure agreement

  1. The period of the non-disclosure: This is the period when the agreement came into existence and the duration of time for which the agreeing parties are expected to hold the secrecy of Information. The NDA should not be entered for a long time as some information must be shared to enter into new ventures and business, and a long-term non-disclosure agreement prevents it.
  2. Confidential Information mentioned in the NDA: This part in the NDA refers and specifies the part of the Information is to be kept secret. Such pieces of information are detailed in a schedule and sent by email with notices attached to them.
  3. Responsibilities, obligations, and duties of the parties to NDA: The non-disclosure agreement contract usually states the responsibilities and liabilities of the parties. For example, the agreeing parties may use a rule on using only a particular way for communication of the Information or may be required to mark any information as “confidential”.
  4. What happens when the NDA is breached:  The most important thing to look out for in an NDA is the results that would occur if the confidentiality clause in the agreement is broken or ignored. It should always be specified in the contract of the deal. Financial penalties or getting an indemnity for all losses occurred due to neglecting the terms of the agreement.
  5. Right to seek an injunction in an NDA: Financial compensation on the breach of the terms of the contract cannot always cover and compensate the losses incurred due to the offence and the contract entering parties mentioned in the words of agreement, that the party accused of breach of the NDA or any of its clause can seek an intervention from the court and get a Stay order on the punishment imposed by other parties only if valid proofs are being provided.
  6. Resolution clause in case of any dispute arising in the breach of the contract:  All disputes arising in case of violation of agreement should be settled and resolved efficiently and quickly so that the cost of indulging in such contract stays low and the company has not to face any more financial burden.

Uses of an NDA:

Non-disclosure agreements are entered by the parties to safeguard the business and its assets. Every company has its competitors who always want to earn more profit and expand their reach in the market by removing their competition. The NDA saves the future of the business by preventing confidential pieces of information from being shared. The NDA is used in the following scenarios:

  • In the case of chemical/mechanical and manufacturing processes, the companies use various sources of raw materials, ingredients, chemicals used in the production, or the method used by the production unit to get the produce. Generally, these are safeguarded under NDA.
  • Marketing, advertisement, and other business strategies are also considered as trade secrets and are protected under the non-disclosure agreement. The business strategies and the plans differ for each company and are considered unique. Every business performs differently, so these manners of advertisement are protected under NDA.
  • Product specification, design, manufacturing process, the blueprint of any upcoming or existing products are considered trade secrets and are protected under the NDA.
  • Computer software is the most common example of the items that are protected under the NDA. Every financial institution, banks, production units of any item, security agencies rely on computer software that is designed according to their requirements and differ for every other business. This software cannot be provided to all and are thus included in the contract.
  • Customers are the most important for the survival of any business. They are considered as the most critical asset for any business. And to protect the customer’s list from being shared by an ex-employee, the business houses include the customer list under NDA.
Senior Executive - Content in Vakilsearch | Former TEDxSKCET Licensee | Content Marketing | Psychology | Engineering (IT) | Google Developers Group (GDG) co-organizer | WTM Ambassador