Friday, 17 August 2018

NON DISCLOSURE AGREEMENTS

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Introduction

Dayo, a friend of mine, called me on a certain day. He told me of this brilliant idea that he had and, being the ambitious guy that he is, how he decided to sell his idea to a multinational company to help bankroll its execution. He told me the multinational company gave excuses as to why they couldn’t fund the project, only to discover months later that the multinational company executed the idea under their own name!

He had been sidelined! He felt cheated and he wanted recourse. He wanted to know what cause of action was available to him. The first question I asked him after he had narrated all was ‘Was there a Non-Disclosure Agreement?’

Some of us can relate to Dayo’s dilemma. Some of us have been victims as well, and many more are wary of being victims themselves. We therefore hide those ideas, afraid of them being stolen and, in turn, these lofty ideas never see the light of day. We keep wondering: Is there no way at all to protect these ideas? Is there no legal platform in which we can present these ideas, without being exploited? One of the ways in which we can achieve this is by having a Non-Disclosure Agreement.

What is a Non-Disclosure Agreement?

A Non-Disclosure Agreement (also called a confidentiality agreement, by some) is a legal contract between at least two parties outlining confidential material, information, or knowledge that both parties wish to share with each other but also wish to restrict the access of such information from third parties. In other words, both parties agree, by contract, to keep whatever information outlined between them a secret. It is a contract through which the parties agree not to disclose information covered by the agreement.

Non-Disclosure Agreements (NDA’s) are quite popular and common in business transactions that take place every day. It could be made between companies that decide to trade with each other and keep intimate details secret. It could be found in sports negotiations (for example: buying a player in football), where both parties undertake not to leak details of their negotiations until they have formally reached an agreement. It could also be found in employment contracts between employer and employee, where an employee undertakes not to divulge certain information as regards the company/ organisation he/she works for. The need to protect information, however sensitive, necessitates the use of the NDA’s.

It should be noted, however, that an NDA not only covers the exposure of sensitive information to a third party but may also cover situations where one of the parties uses confidential information for his own gain at the detriment of the other party.

NDA’s may be categorised as ‘Unilateral’ or ‘Bilateral’.

A unilateral, or one-way, agreement is where one party wishes to disclose certain information to another party but needs the information to remain secret for whatever reason like making sure the other party does not use the disclosed information without compensating the discloser. This is the type of NDA that would have served Dayo.

A bilateral, or mutual, agreement is where both parties will be supplying information that is intended to remain secret. This type of agreement is common businesses are considering a joint venture or merger.

Aside from the obvious reason for drafting a Non-Disclosure Agreement to protect our ideas, why is one necessary? What are its functions, its advantages? Why would I need one?

  • It is legally binding on parties who sign it. As explained earlier, the information or material to be protected is expressly stated in the contract. Once it is signed, you are guaranteed that the other party is bound by law not to disclose, divulge, or use your material, a breach of which will have penalties. Whoever defaults (by divulging or using the information) would be liable to compensate the other party for its breach. The party who has been put at a disadvantage can even go ahead and seek damages (compensation) or an injunction (an order from the court restraining the continued use of the information).
  • An NDA states exactly what information should be kept secret or not. The contract answers the following questions such as: What information is deemed ‘secret’? Would the whole discussion be deemed secret? Would restricting all of the information jeopardize the successful implementation of the project? Having a non disclosure agreement would clear whatever issues there might be as regards what to would be deemed secret, or not.
  • Another advantage of an NDA is that it can still be in existence and enforceable even after the expiration of the project. In other words, the agreement may require the parties to maintain the secrecy even after the project which they undertook may have been concluded and disclosure by either party would be penalized.
  • The importance of NDA’s, especially in today’s dealings, cannot be overemphasized. It may be difficult to protect your ideas, however, a Non-Disclosure Agreement is a low-cost yet effective approach to doing just that.

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