Written by Team Farallon
Non-Disclosure Agreements (NDAs) are an important legal framework used to protect sensitive information or ideas. They are used commonly by startups or companies who wish to protect their information or ideas from prying eyes.
NDAs are a legally binding contract between 2 parties of concern – the owner of the sensitive information and the recipient of said sensitive information.
With the signing of an NDA, participants of the agreement would keep the sensitive information confidential.
A typical NDA lasts between 3 to 5 years, afterwards, this information can be made public. The NDA cannot be enforced once this information is publicly disclosed.
The core element of an NDA is the obligation to not disclose the information. The NDA usually stipulates that the other party:
The particular content of each NDA is unique, as it will refer to specific information, proprietary data, or other sensitive details determined by the people involved and what is being disclosed. Generally speaking, there are two primary types of non-disclosure agreements: unilateral and mutual.
In general, there are 2 primary forms of NDAs: unilateral and mutual NDAs. The content in each NDA is unique as it refers to specific details determined by the various parties involved and what information is being disclosed.
Unilateral Non-Disclosure Agreements are NDAs where the receiving party agrees to not disclose the protected information. This is a more common form of NDA and is used in situations such as when a business owner needs his employees to not reveal the company’s trade secrets. The provider of this information is free to use the information and share it with other parties at its sole discretion.
This agreement is less commonly used. A mutual NDA stipulates that one party cannot disclose information about the other party. This form of NDA is entered into when there is an exchange of information between 2 parties rather than a one-way disclosure. An example would be when two businesses collaborate, they need the other party to not disclose each others’ sensitive information.
The party needs a clear definition of what is to be covered under the Non-Disclosure Agreement as well as the exclusion of the information under the NDA. These definitions should be explicitly written in considerable detail.
The typical exclusions apply to:
Legal obligations of the parties are included. It stipulates any restrictions or prohibitions the recipient of the confidential information must abide by. There should be exclusions of individuals who access this information for the course of daily business.
In some NDAs, a duty of confidence may be imposed on the recipient of the agreement.
It is commonly provided that no copies of the information would be retained after the expiry of the contractual term.
NDAs also contain the consequences of breaching the agreement.
The term of the NDA indicates how long the NDA is to be active for. Typically, the standard use for NDAs ranges from 1 to 5 years. However, this all depends on the nature of the transaction or market conditions. As an employer or business owner, it is in your interests to enforce an NDA for as long as possible. Signatories to your NDA generally prefer for the document to expire at some point. For this reason, it is rare (yet possible) to see NDAs operating indefinitely as it unfairly prejudices the contracting party. Ideally, NDAs will cover an appropriate amount of time to protect the disclosing party’s interests. Having a reasonable time frame for your NDA is especially important if a dispute arises. This is because Courts look to the period, reasonableness, and impact on the receiving party in making their decision.
An NDA is active for a fixed period of time ranging from 1 to 5 years which depends on the nature of the transaction or the market conditions. It is in the interest of the employer or business owner to enforce the NDA for as long as possible. Generally, other parties involved would prefer the NDA to have a definite expiry as it unfairly prejudices the contracting party. The ideal NDA would cover an appropriate duration of time to protect the disclosing party’s interests. A reasonable time frame for your NDA is crucial especially if a dispute arises. This is because Courts look at the period of the NDA, reasonableness, and impact on the receiving party in making their decision.
If there is a dispute on confidentiality, the Singapore Courts would consider if:
If the Courts took the view that the information ought to be protected, it could grant an injunction to prohibit the disclosure of the information for some time.
Usually, the NDA will include a provision that would state that the NDA does not operate to grant or transfer any rights or license to the recipient.
The document should contain the law and legal jurisdiction governing all parties in the NDA, any limitation of liability and prohibition against assignment. This enforces the NDA which does not operate to grant or transfer any rights or license to the recipient.
NDAs does not contain the following:
The primary function of the agreement is to protect sensitive information generally not known to the public.
There is no restriction as to what information can be guarded under an NDA. In terms of technological information, NDAs also protect intellectual property.
A breach in NDA constitutes a breach in the contract for which the injured party can claim damages. The injured parties need to furnish a burden of proof to show evidence of disclosure of information harming the interests of the parties or hurting the profits of the affected company.
An NDA has the core interest of keeping information confidential for a limited period of time or permanently. There are 2 forms of NDAs available. The selection of an appropriate NDA depends on the outcomes of the agreement as well as what the parties wish to agree or disagree on. A breach in confidentiality constitutes a breach in contract and the injured party needs to furnish a burden of proof to prove damages to the company affected by the breach of sensitive information.
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