Importance of Non-Disclosure Agreements

A non-disclosure agreement is an agreement under which a person (i.e. disclosing party) agrees to share confidential or secret information with the other person (i.e. receiving party) and the receiving party is under legal obligation not to disclose such secret information to any third party for certain specified period or without legal permission of the disclosing party subject to certain restrictions or otherwise as mentioned in the agreement.

The non-disclosure agreements are of three types:

1. Unilateral
2. Bilateral
3. Multilateral

Advantages of Non-disclosure agreement:

1. Non-disclosure of subject matter (essence of business) protected from being disclosed to the third party.
2. The parties to agreement safely work upon the subject matter.
3. In case of disclosure, it will be easy to identify the wrongdoers, whether he is party to agreement or not.
4. If remedy or damage or compensation, in case of breach of trust, is stipulated in the agreement so the burden of the court will be reduced to certain extent.
5. Details of the clients, parties to business, blueprints, plans, patentable invention, a business model, a new business venture or concept of restaurant and so on will be secured.

Important inclusion and Clauses:

1. Details of the confidential information:
   Under this clause, what is the nature of the information that is to be kept confidential and the purpose behind such confidentiality.
   For ex: - Bank-Client Confidentiality, in this Bank and its employees are bound to not disclose to the third party anything with regards to any bank details, account numbers or ATM passwords, residential address or personal information and so on.
2. The use of the subject matter and reasons of confidentiality:
   In this clause, the utilization of the secret information and the reason in support thereof, and how such information is kept safe and secured.
3. Details of the parties to agreement:
   Names, roles and details of the disclosing parties and receiving parties and employees under their control.
4. Consequences of the disclosure of the subject matter:
   If such information is disclosed, then consequence of such information is to be communicated to the parties to agreement and employees under their control.
5. Remedy or compensation for the breach thereof.
   The non-disclosure agreement also should contain the remedies in case of breach of trust and the compensation thereof be stipulated.
6. Duties and obligation of the receiving party and management under their control.
7. Other terms and miscellaneous conditions as deemed fit by the contracting party.

Termination: Ways and Reasons

1. Modification of agreement without knowledge of Receiving Party:
   If disclosing party changes or causes to be changes the material substance of the subject matter of the agreement without consent or knowledge of the receiving party, such agreement will be invalid because the receiving party will not be liable for the consequences and not bound by the legal obligations arising thereunder, because he was agreed to undertake under previous agreement.
2. Disclosure of subject matter:
   The non-disclosure agreement is terminated if subject matter is disclosed to the third party.
3. Destruction of subject matter:
   If the subject matter which is accidently destroyed or lost, then such non-disclosure agreement comes to an end.
   For instance, if the blueprint of model is destroyed by fire then the agreement comes to an end, because the subject matter is itself is lost and the parties are not bound by the obligation arising thereunder.
4. Subject matter being illegal or unlawful:
   If the subject matter is later become an unlawful or illegal or constitutes an offence under or defeat any provision of the law or under any statute for the time being in force or it is forbidden by law or involves or implies injury to the person or property of another or is against the morality or public policy.
5. Death of the disclosing party:
   If the disclosing party after making non-disclosure agreement but before disclosing to the receiving party, dies, then the other parties to agreement are bound thereunder.
6. Consideration or object is unlawful in part:
   If any part of a single consideration for one or more object or any one or any part of any one of several considerations for single object, is unlawful, the agreement is void.
   If such unlawful part is severable from the lawful part, then such separated unlawful part will be declared as void and the lawful part will remain valid. If both are inseparable, then the entire agreement will be void.