Non-Disclosure Agreement

Explanatory Notes

Non-Disclosure Agreement

This non-disclosure agreement template is designed for use when a person wishes to enter into discussions for a new project but, before doing so, they require the other party to agree that all information that they provide will be kept confidential and returned if the project does not go ahead. 

This non-disclosure agreement form is fairly strongly worded and imposes strict obligations on the addressee. It is in the form of a letter which has to be countersigned by the addressee before any confidential information is released. It can be used for a wide range of projects – from the development of land to the manufacture of a new product.

Clauses in the non-disclosure agreement form

Clause 1 makes it clear that all information is to be treated as confidential and defines what is meant by "Confidential Information". Note the exceptions in clauses 2 and 8.

Clause 2 imposes obligations on the other party to ensure that confidential information which it receives is not passed on to any third party. Where employees need to be involved, they, in turn, will have to be made subject to confidentiality undertakings. If the party providing the confidential information wants to be really careful, they may want to vary this clause so as to ensure that the recipient produces signed confidentiality undertakings from their employees and others before that information is passed on to them. Disclosure to professional advisors (e.g. lawyers, accountants) may often be appropriate and the final sentence of clause 2 provides for this.

Clause 3 restricts the copying of confidential information.

Clause 4 requires all confidential information to be returned if the negotiations break off. The final sentence restricts the other party from talking to any third party while those negotiations are in progress. This may or may not be relevant and may or may not be of significance justifying greater emphasis.

Clause 5 provides that any confidential information provided to the sender of the letter will be subject to similar obligations of confidentiality.

Clause 6 is a “catch-all” provision that prevents the other party from making use of the confidential information in any way that may be against your interests. Its main use is to act as a warning to the other Party, although there might be difficulties in relying upon this clause in any litigation.

Clause 7 obliges the other party to tell you as soon as it becomes aware that the confidentiality obligations have been breached. This is important because it allows you to take action to protect your interests as soon as possible.

Clauses 8 and 9 make it clear that confidential information will cease to be treated as confidential if it is publicly available or disclosed by order of the courts or a relevant regulatory authority. Clause 9 further provides that the other party must notify you as soon as possible it obliged by court order to disclose confidential information.

Clause 11 provides for an indemnity in your favour. An indemnity does not increase the scope of any liability for breach of the Non-Disclosure Agreement but may make it easier for you to recover your losses.

Clause 12 makes it easier for you to obtain an injunction [a speedy order from the court that obliges the other Party to desist from doing something that constitutes a breach of the Non-Disclosure Agreement].

Clause 13 specifies the governing law and provides for the courts to have jurisdiction in the event of any dispute. Sometimes confidentiality obligations contain a provision designed to allow one party to obtain an injunction in the courts preventing disclosure by the other.

Those entering into a confidentiality agreement such as this should bear in mind that enforcement of the agreement may prove to be difficult. Having said this, it is better to have a confidentiality agreement than no agreement at all if you want to maintain secrecy while you are in negotiations.