The Non-Disclosure agreement serves as a crucial legal framework to prevent the recipient of sensitive and confidential information from disclosing it. Read this blog to know more
It is necessary to maintain the secrecy of some affairs and processes of an organisation to survive in business. A company adopts a legal agreement to protect confidential information from being disclosed or passed on to other persons.
Companies, agencies, and individuals implement the use of these documents to protect their innovative ideas from being misused by the parties with whom they are working.
The main reason for the signing of an NDA is to protect information shared. It ensures that the privacy and confidentiality of data are safe. It reduces the scope of breach of any disclosures and will give the affected party a resort to suing the other party.
A Non-Disclosure agreements (NDA) is a legally binding contract party agrees not to share sensitive information about their business or products with a third party. It is a legally framed document. It binds two or more parties to have within themselves the confidential information and not with anybody else for a specific time limit, for a stipulated period, or until the contract is valid.
Non-Disclosure agreements are a crucial part of the legal framework used to prevent the recipient of sensitive and secret information from disclosing it. These documents are in use by businesses and individuals to protect their innovative ideas from being appropriated by the parties they are negotiating with.
It is the most cost-effective legal document to secure crucial information about the company. NDA is the legal way to maintain comfort and trust in a relationship.
NDA should mention the repercussions of disclosing prohibited information, which should prevent any leaks. A non-disclosure agreement must distinguish confidential information and trade secrets from each other. The period of confidentiality is indefinite concerning trade secrets. We also want to make sure that Non Disclosure Agreement Legal formalities are not pending.
Where can NDA be used?
Joint venture business
Both the companies entering into joint ventures sign the Non-Disclosure Agreement. It forbids both parties from sharing or disclosing confidential information that will be against the company’s interest.
NDA is entered into while taking services of Financial Documents, advertising agencies, tax consultants, technical consultants, and other services required by the company or person. It prohibits the service provider from disclosing confidential information which will be known while rendering service.
The employee signs a Non-Disclosure Agreement (NDA) during the appointment. It curtains the employee from discussing or sharing sensitive information with anybody.
The company uses this agreement in the final settlement of the employee. It stops the employee from disclosing confidential information or using it in his new venture.
Non-Disclosure Agreement consists of:
- Name and address of both the parties
- Meaning of confidential information in the particular context
- Clauses excluded in the company’s secret information.
- Procedures to follow to reveal information.
- The validity of the agreement period
- Other and miscellaneous information depends on the requirement of the parties.
The legality of the Non-Disclosure Agreements
Any document made as per the provisions of law is legal. The Non-Disclosure Agreement is a legal way of protecting the interests of persons and companies. The company can approach the court on breach of the agreement. It becomes obligatory to comply with the terms of the agreement. If either of the parties breaches, provisions are made to seek court action to prevent further disclosures. The first party will sue the offending party for monetary damages.
The Non-Disclosure Agreement safeguards the interest of the company while protecting the safety of the critical data. It should also align with the law of the state. Though NDA is legal, many factors determine the legality of the agreement.
How does a Non-Disclosure Agreement become illegal?
Non-Disclosure agreements will be illegal in cases when the first party influences the second party to hide or perform things done in place of general practices.
The various terms or information provided in NDA determine the legality are as follows:
Non-Disclosure Agreement in employment
Employees sign the Non-Disclosure Agreement to protect trade secrets, intellectual information, Asset ownership information, and research and development details of the employer.
The company can use the same to deprive the employee’s fundamental rights. It can prohibit employees from disclosing unlawful practices in the organisation or victimise the employee of such practices.
Employers believe reporting irregularities in the organisation against the laws of the state governing them will harm the business.
NDA is Illegal in Organisations where the employee is prohibited from disclosing and is the victim of
- Sexual harassment
- Gender inequality
- Race and skin color discrimination
- Lack of safety precautions
- Unhealthy working environments
- Irregularities in remuneration
- Unethical work pressure and harassment
- Lack of amenities not provided as per laws.
- Grievances not addressed.
- Force to sign an NDA for settlement.
- Influencing the employee to do illegal activities
Other reasons why Non-Disclosure Agreements are termed illegal?
- A non-disclosure agreement made with illegitimate intentions is illegal.
- Any company that uses NDA for unethical practices like black marketing, hoarding, or misleading information about financial benefits is considered illegal.
- NDA when used for propagating false conditions of the company by hiding the actual facts from relevant stakeholders, like financial institutions and banks to acquire facilities.
- When NDA requests the second party not to disclose its illegal activities that are against the law of the land, like smuggling, trafficking, tax evasions, and fraudulent financial transactions.
- Requesting to uphold information that causes harm or inflicts damage to the public is termed Illegal for NDA.
- When NDA requests not to reveal the business relationship with a foreign enemy country of the state or with any organisations which endanger national security is illegal.
- A non-disparagement clause in NDA is considered illegal. Using the clause in any form is considered null and void.
- If the purpose of the NDA is not clear and impossible to fulfil will be considered null and void by the court.
- If the agreement lacks consideration and intentionally misrepresents, it will not be considered by the court of law.
- Any wide excessive application of the confidentiality clause is null and void. If
the receiving party feels the responsibility is difficult and impossible to perform is illegal.
The sole purpose of a Non-Disclosure Agreement is to protect the interest and
private information from being known to the public. It is a legal frame adopted
to protect the information. Consider all the aspects before making or signing the NDA. You may have many doubts and apprehensions concerning NDA. Before signing an NDA seek expert advice.
Look for impossible clauses and conditions in the agreement. Referring to Vakilsearch will help you to understand the concept of a Non-Disclosure Agreement.