A non disclosure agreement in Nigeria also known as Confidentiality Agreement is a legal contract or agreement between parties with the sole purpose of legally forbidding parties from disclosing confidential information that has been shared together in the course of a commercial or employment relationship to any third party. It signifies that a confidential relationship exists between parties involved.
The non-disclosure agreement (NDA) may be used by organizations that are considering doing business together to restrict the use or disclosure of confidential information shared in the course of the business. NDA is also commonly used in an employee-employer relationship where employees need to have access to confidential information in course of their employment and the employer prepares a non-disclosure agreement to prevent the use or disclosure of the information for any other purpose.
Types of non-disclosure agreement
A non-disclosure agreement can be either a Unilateral Agreement or a Mutual Agreement, which is dependent on which party is providing the secret information.
A unilateral Non-disclosure agreement is a one-way agreement where only one party in the business relationship will be provided with the information to be protected. It is designed to stipulate the duties and obligations of one party to the agreement. This is usually used in an employee-employer relationship.
A mutual Non-disclosure agreement is a type of agreement where the information provided will be shared between the parties. The agreement will clearly set out the confidential information that parties wish to share between them and restrict their use and access to third parties.
The relevance of Non-disclosure agreement
- It is used to define confidential information that can be disclosed and what information cannot be disclosed.
- It is used to protect information from being disclosed
- It also sets out the consequences of a breach of the non-disclosure agreement
Clauses in a Non-disclosure agreement
It is important to note some important clauses that must be present in a non-disclosure agreement and its importance in a commercial transaction.
- Parties Clause: for clarity purposes, the full name of parties and their addresses must be properly described in the agreement. Where the information will be obliged to a third party, the full name and description of the third party must be included for clarity purposes.
- The definition of the Confidential Information: the parties to the agreement must state what confidential information means. The definition must cover as much information as the non-disclosure agreement must not be vague.
- The obligation of the receiving party: this clause must state that the main obligation of the receiving party in the agreement is to keep all information secret as well as the other party in the agreement.
- The term of the agreement: the importance of this clause is to ensure that all terms in the agreement are expressly stated and no implied terms are included. The duration of the agreement which is determined by the termination clause must be stated and the period in which parties may disclose information after the relationship has terminated must also be expressly stated.
- Exclusion clause: this clause provides for information that is not expected to be kept secret. The recipient party is also allowed to disclose information required by law and also when the party is obliged to do so. It must also state the complete description of cases where restrictions on disclosure are not applicable
A non-disclosure agreement is as binding as a contractual agreement and it gives assurance that where there is a breach of the agreement by one party, the other party can seek redress for damages resulting from the disclosed information.
There are other reliefs available to an aggrieved party where there is a breach of the confidentiality agreement such as Account for profit, where the defaulting party is to account for profit made from the breach and Injunctive relief.
Finally, it noteworthy that an NDA imposes an obligation on parties to it, and confidential agreement can be included in the main contractual agreement or as a stand-alone agreement.
By Corporate & Commercial Law Team at Resolution Law Firm