A non-disclosure agreement (NDA) in India according to the Indian Contract Act 1872 is an important way to protect the intellectual property of your business. Whether you’re a new business or have been around for a while, an NDA can help you keep your confidential information from getting out without your permission. In India, NDAs are often used in business negotiations, joint ventures, and mergers and acquisitions, among other things.
But many business owners and entrepreneurs don’t know much about NDAs and may not know how to write, negotiate, and enforce them well. This is why we have created a complete guide to non-disclosure agreements in India, covering everything from legal and practical issues to common mistakes to avoid.
You will learn about the different kinds of NDAs and also about how important it is to have a clear definition of confidential information and what you should do to protect it. We will also talk about what might happen if your NDA isn’t written well.
Whether you’re a business owner, an entrepreneur, or a lawyer, this blog is meant to give you the information and knowledge you need t o protect your confidential information. So keep an eye out for our next posts and don’t be afraid to get in touch with us if you have any questions or concerns.
Table of Contents
What is a Non-Disclosure Agreement?
Who are the Parties of a Non-Disclosure Agreement?
Types of Non-Disclosure Agreements
When to Use a Non-Disclosure Agreement in India?
Structure of a Non-Disclosure Agreement
How Do I Write a Non-Disclosure Agreement?
What is a Non-Disclosure Agreement?
A Non-Disclosure Agreement (NDA) is a legal contract that creates a professional relationship between two or more parties to keep shared information hidden or private from others. Although mostly used in business collaborations, Non-Disclosure Agreements also help companies during possible partnerships, new hires etc.
When it’s an employees signing the NDA, it is to make sure they keep their company’s private information, like special methods or business strategies, confidential. Hence it is also known as a confidentiality agreement. The core purpose of an Non-Disclosure Agreement is to guard important information against being leaked to competitors or the public, helping to maintain a company’s competitive edge and mutual trust among the parties involved.
Who are the Parties of a Non-Disclosure Agreement?
Non-Disclosure Agreements (NDAs), within India and globally, there are primarily two parties in this agreement:
Disclosing Party:
A disclosing party is the individual or entity that shares or is the one who “discloses” confidential information. In a unilateral or non-mutual NDA, the Disclosing Party is the sole sharer of sensitive data, such as an startup revealing a new product to a potential investor, or an employer sharing their company’s private information with an employee. The obligations of this party are:
- Make sure any shared information is clearly labeled as confidential, or say it’s confidential soon if it’s not immediately clear.
- Only share information that’s needed for the agreement’s goals.
- Keep track of what and when information is shared to avoid any disagreements over what should be kept confidential.
Recipient Party:
This party “receives” the confidential information from the Disclosing Party. In a mutual NDA, where collaboration or partnership is the reason of making such an agreement, all parties involved can be both Disclosing and Recipient Parties, as they exchange sensitive information with each other simultaneously. The obligations of this party are:
- Keep all received information private and only use it for the reasons mentioned in the NDA.
- Use good security practices to keep the confidential information safe, just as you would with your own important information.
- If any confidential information is leaked or shared without permission, tell the Disclosing Party right away.
Types of Non-Disclosure Agreements
Unilateral NDA
In a unilateral NDA, only one party agrees to keep the other’s sensitive data private. For example, a client hiring an engineering firm for a new product may require the firm to sign a unilateral NDA. This NDA outlines the use and sharing of confidential information, obligations of the receiving party (the engineering firm), and consequences of breaching the agreement.
Bilateral NDA
Bilateral NDAs, also referred to as mutual NDAs or two-way NDAs. Both parties divulge their private information to one another and each side has the ability to control how the other uses and shares their information.
For example: A drug company and a research center work together to make a new drug. Both sides have information that is kept secret about how drugs are made. They both sign a bilateral NDA to make sure that neither of them will share or use the confidential information of the other party for their own gain. The NDA would have rules about how to define confidential information, how it can be used and shared, what each party’s responsibilities are, and what happens if the rules are broken.
Multilateral NDA
Three or more parties consent in a multilateral NDA when one or more of the parties disclose information to the other parties. It is then being guarded from further disclosure. But multilateral NDA has the benefit of eliminating the requirement for numerous bilateral agreements between the parties.
Here’s an example of an organisation with a multilateral NDA:
A group of financial institutions are working together on a project to create a new payment system. Each institution has private information about how it works and how the payment system is being built. They sign a multilateral NDA to make sure that no one will tell anyone else’s secret information or use it for their own benefit. The NDA would have rules about how to define confidential information, how it can be used and shared, what everyone’s responsibilities are, and what happens if the rules are broken. Everyone in the group would be bound by the NDA.
When To Use a Non-Disclosure Agreement in India?
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NDA while entering into a business deal
Firstly, signing an NDA is always a wonderful idea. But if it’s a business deal, it’s a manadatory rule to make an agreement.
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NDA while starting a new project
In India, signing an Non-Disclosure Agreement is useful when starting a new project with a small team. This applies even if advertisements are unclear, no formal corporation or partnership exists, or there’s no IP to protect.
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NDA to protect your trade secrets
When a trade secret needs to be protected, we frequently advise signing a trade secret non-disclosure agreement. Such agreements should be required to be signed by top executives and staff.
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NDA when employees have access to confidential information
Consider the amount of effort you put into developing your company. Protect things like confidential customer information, agreements, proprietary business procedures, etc. Make sure it is against the law for your staff to quit and start a rival company utilizing your sensitive information.
Structure of a Non-Disclosure Agreement
A few elements that you need to consider extremely essential in the agreement are:
Date and names of the parties to the agreement
Mentioning parties helps in arranging the clauses of your agreement. This arrangement depends on the type of the agreement, which will be explained further below.
Description of the confidential information
The definition of confidential information is the most important section of the agreement that you are providing to make things clear. But only the disclosures listed in the agreement are considered confidential. This is because not all communications between the parties can be considered private.
Non-confidential information
The NDA must specify non-confidential information once you’ve explicitly established what information is protected and how it should be handled. Although it could seem repetitive, it is necessary for clarity.
Requirements of the parties
Including this clause lists all of the parties’ responsibilities and obligations, whether mutually agreed upon or imposed by the disclosing party. According to the parties’ preferences, a variety of responsibilities and duties might be included to protect their private information.
Term of the agreement
Each NDA is distinct, thus each one has a different duration. The typical duration of a Non-Disclosure Agreement in India is one to ten years. But it may be unlimited depending on the information that needs to remain secret.
Agreement’s enforcement and termination of confidentiality
No prospective buyer wants to sign a contract that will last indefinitely. An agreement is typically in effect for one or two years. Sometimes parties also agree to end the contract once the transaction is over.
Governing laws
The agreement specifies the language of conduct for court proceedings in case of any confidentiality disagreements. Additionally, it states that the State body where you reside will govern the agreement.
Consequences of a breach
You will face legal action from the other party to the NDA if you signed one and then broke its terms by illegally exposing confidential information. This will constitute a violation of the Non-Disclosure Agreement in India. Additionally, you can be held liable for infringements of intellectual property rights.
Remedies for a breach
There are numerous options for actions or solutions. A restraining order, monetary compensation for damages, and other legal remedies for breach of fiduciary responsibility and copyright, patent, or trademark infringement are a few examples of these.
Exclusions from treatment of confidentiality
Certain material will be excluded from confidentiality agreements; this is not a violation of the clause. These exclusions will be meant to cover circumstances when keeping the material confidential would be unjust for the opposing party.
Non Waiver
A Non-Waiver Clause in an agreement is essentially a condition to ensure that neither party has waived their right to file a lawsuit if the other party breaches the agreement or does not fulfill their responsibility.
Signature block
It’s time to make room for signatures once the integration and choice of law formalities have been completed. Each signatory should have their own signature block on the NDA. Add a line for your signature, the party’s printed name, and the date you signed the NDA.
How Do I Write a Non-Disclosure Agreement?
Step 1: Define the scope
Which details are deemed confidential? Typically, NDAs need a clause to ensure that any information that a “rational person” would expect to be confidential remains private.
Step 2: Define party responsibilities
What should the recipient do to ensure the confidentiality of the information? How would they restrict unauthorized access by third parties?
Step 3: Identify possible exclusions
When is it permissible to disclose confidential information? What data is already omitted from the confidentiality definition? Disclosure may be needed in instances involving legal procedures and the use of subcontractors.
Step 4: Determine the term
Disclosing parties might want the duration of the agreement to be indefinite, whereas receiving parties sometimes prefer a time restriction. When determining the term, the interests of both parties must be addressed; there should be no doubt on the duration of confidentiality.
Step 5 – Draw out consequences
Will a violation result in the termination of an employment contract or a commercial partnership? Can the offended party petition the court for an injunction or even damages?
Precautions While Creating and Signing a Non-Disclosure Agreement in India
A Non-Disclosure Agreement (NDA) must be carefully drafted in India to make sure that its purpose of protecting of private information is fulfilled. Here are a few simple safety measures to remember:
Specify the Confidential Information:
Clearly define what information is meant to be confidential . This includes all sensitive data, passwords, account information, messages, emails, or any other materials that need protection.
Understand all Rights and Obligations:
Both or all the parties involved involved in an NDA should fully understand what they are agreeing to, that includes the duties they have and the terms of the contract.
Attention to Detail:
Look into the opposite party and know their intention before agreeing to the NDA. This makes it easier to adjust the agreement to any unique risks that may be involved.
Key to Balance:
Stay clear of using phrases that are overly strict or unjust as they could complicate even simple conversations.
Clear and Consistent Clauses:
To prevent any misunderstandings and possible legal problems, make sure the agreement has no clashing claims.
Other Options for Resolution:
To avoid wasting both money and time in the case of a dispute, include a clause requesting arbitration or mediation.
Use Clear Language:
Avoid any unclear lingo to avoid miscommunication. Always verify that everyone understands the terms of the agreement.
Examine In-Depth:
To identify any confusing sections, carefully read the entire agreement and have a chat on it so the parties have no second thoughts about the clause.
Add Termination and Renewal Terms:
Properly indicate the end date of the agreement as well as the conditions for renewing it, if necessary.
Legal Review:
To make sure the agreement is enforceable and compliant with the law, have a lawyer review it.
FAQ’s
1) What is the cost of Non-Disclosure Agreement in India?
Stamping is an obligatory part of the procedure. Without it the court will not accept your agreement under any circumstances. The rate of stamp duty on a non-disclosure agreement will differ from state to state. Although the majority of Indian states adhere to a standard range that falls between Rs. 20 and Rs. 100.
2) Is registration of a Non-Disclosure Agreement compulsory?
No, it’s not compulsory by law. But if you wish to register it, you can do so by going to the sub registrar office where you live. Every state has its own set of regulations governing the fees and processes involved in registering vehicles.
3) When can an NDA be broken?
If your agreement expires:
Almost all NDAs have a time limit set to expire. But once this period expires, the obligations and responsibilities to keep any data confidential might be considered as not applicable.
Mutual consent to let go:
Both parties could mutually agree to free each other from all confidentiality obligations, which will terminate the NDA.
Information becomes public knowledge:
The data turns out to be publicly available with no fault of the receiving party. Consequently, the obligation to keep it secret becomes void.
Through legal requirement:
Lastly, suppose one party may violate the NDA. However, they could be forced to release private details if a court or government agency demands it.
How can Smart Sales Kit help you with your NDA?
In conclusion, NDAs serve an essential function in safeguarding the proprietary information and trade secrets of your business. Having completed sales documentation on hand can provide an advantage over the competition. Furthermore, it can also free up your sales staff to concentrate on boosting sales rather than writing up paperwork. And a well-designed sales kit can help a company save time and money while also boosting productivity and revenue.
In just a few minutes, you can benefit from the Smart Sales Kit’s 2000+ original, error-free, and modifiable sales documents. To know more visit our official website!
