The importance of Non-Disclosure Agreements

Is an NDA Worth the Paper it is Written on?

Non-disclosure in general

A Non-Disclosure Agreement (NDA) is a legal document that protects parties’ confidential information. An NDA is an agreement by two or more organisations’ not to give information to others (including third parties) about formal discussions they are having or plans they are making together. It can also be incorporated into agreements where the parties have decided to work together for a project.

Keeping information confidential

An NDA should be signed before releasing confidential information. There should be a duty of good faith to keep confidential information, just that; confidential. However, it is important to sign an NDA before negotiations commence. In that way, the parties know for a fact their confidential information will be kept secret and treated with the utmost care.

It is important to ensure the other party will not disclose that information to someone else. The NDA should cover sensitive information given out about either party. There are many different instances where an NDA can be useful. An NDA is important to keep employees, agents, third-party businesses, consultants, and others that they’re working with from sharing confidential information.

During negotiations all parties must take all steps that may be reasonably necessary to prevent the confidential information falling into the hands of an unauthorised third party. During these negotiations, neither party may not use any of the confidential information in the:

  • development;
  • manufacture;
  • marketing; or
  • sale,

of any goods unless it is for the purposes of the negotiations.

Neither party must use or disclose or attempt to use or disclose the confidential information for any purpose other than performing its contractual obligations as per the NDA.

What constitutes confidential information

The information that should ideally be kept confidential is:

  • trade secrets;
  • client information;
  • information relating to the:
    • customers;
    • suppliers;
    • methods;
    • products;
    • plans; and
    • finances,
  • commercially sensitive information;
  • technical information and specifications;
  • manufacturing techniques;
  • designs;
  • instruction manuals;
  • blueprints;
  • electronic artwork;
  • samples;
  • devices;
  • demonstrations;
  • formulae;
  • Know-How;
  • information concerning materials; and
  • marketing and business information generally.

What happens when an NDA is breached

If there is a breach, the person who breached the agreement can be sued. They may have to pay to cover lost profits. A non-disclosure agreement enables a party to use the court system to recover damages if trade secrets or other proprietary information is revealed by someone who has signed the agreement.

Exceptions to NDAs

Upholding an NDA will not apply to information which:

  • is lawfully in the public domain before the NDA is signed; or
  • lawfully comes into the public domain after the NDA is signed, otherwise than as a result of the conduct of the party that is has signed the NDA or one of its employees or agents, consultants; or
  • a party is compelled to disclose in terms of a court order;
  • is approved for release upon the written confirmation of one of the parties to an NDA; and
  • is required by law to be disclosed.

The onus of proving the facts necessary to sustain any one of the exceptions rests on the party that is relying on the exceptions.

Enticement and non-circumvention

Some NDAs will also include clauses that prevent enticement and non-circumvention. This will discourage the enticements of employees, suppliers, and consultants to leave the one party and work for the other. Non-circumvention basically prevents any of the parties from circumventing each other. This would include any attempt for such circumvention of each other and/or any of the parties involved in any of the transactions, that the parties wish to enter into.

This article was written and submitted by Nozipho Mvulane. For further information, please contact   

Article Disclaimer

This article is not intended to provide legal advice. This article is a general information sheet and should not be used or relied on as legal or other professional advice. This article is based on research regarding the UIF and may be subject to change. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE).

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