NDA – Confidentiality agreement in international contracts

The NDA (Non-Disclosure Agreement) has not been regulated separately in the Polish legal system. It belongs to the group of so-called unnamed contracts, but commonly used in the trade.

The purpose of the NDA is to secure the confidential nature of information that is provided to the other party in connection with the commencement of negotiations, determining the terms of possible cooperation between the parties, the concluded contract, cooperation or employment.

NDA may be concluded by any participant in legal transactions. In case that it is a company, one should of course remember about the contractually adopted method of representation (e.g. management board in the case of a limited liability company). Entrepreneurs conducting individual business activity sign the NDA on their own behalf. Depending on the details of a given cooperation, employees and associates of a given entrepreneur or company may also be required to sign the NDA. The agreement may also impose on the parties an obligation to ensure that these entities are familiar with the obligation of confidentiality and keep the arrangements made between the parties.

In the international trade, concluding NDAs is a standard. These agreements are concluded whenever at least one of the parties treats the information that may be provided to the other party as confidential, valuable and of economic value. In practice, the NDA template is provided at the beginning of the conversations initiated by the parties, even before the negotiation or conclusion of the contract. However, it also happens that the NDA is signed together with the conclusion of the relevant agreement, which is to regulate the principles of cooperation between the parties. The expectation that the cooperation of the parties will be accompanied by the conclusion of the NDA agreement shows a serious approach to the business and helps to build the image of a professional.

The content of a specific NDA will depend on which entities and in what situation it is concluded. A different type of contract will be concluded in a bilateral professional relation, and another in an employer-employee relation.

While concluding an NDA, it is worth asking what the entrepreneur actually considers to be confidential information that should be protected and for what reason. The use of ready-made templates, without taking into account the specifics of a given business, may not provide the entrepreneur with an appropriate level of protection. The NDA agreement should refer to the actual operating conditions of a given entrepreneur or company. There is no single, universal NDA template that can be used in every case.

While entering into an NDA, keep the following in mind:

2.1. Preamble

This part is not mandatory in any contract, but many times it helps to put it in context. It happens that the preamble is also helpful in indicating the consensual intention of the parties while concluding the contract. In the case of an NDA, it may refer to the purposes for which the agreement was concluded.

2.2. Indication whether the confidentiality obligation applies to one party to the contract or to both parties

In this section, it is worth indicating who provides confidential information to whom in connection with the started conversations, negotiations, concluded agreement or cooperation. The NDA can be unilateral and bilateral.

2.3. Determining of the scope of information considered as confidential

This is one of the most important points of the NDA. It is worth remembering that the contract should refer to information that the entrepreneur treats as confidential. An NDA that stipulates the confidentiality of any information provided to the other party may not provide much security in the end. The scope of information defined as confidential is to correspond to what the entrepreneur actually wants to protect in connection with a given transaction, contract, cooperation or negotiations. Concluding a contract that aims to protect information freely disclosed by the entrepreneur to the public misses the point.

2.4. Determining how to handle confidential information

The NDA should also outline the proper handling of confidential information by the party to whom it is disclosed. It is essential to consider various aspects such as:

• the particular people to whom this information may be provided (e.g. employees, associates, persons with whom an NDA agreement has been signed, or persons who have been obliged to keep information confidential on a different basis),
• precautions necessary for the transfer of information (procedural requirements, necessary consents, security measures, passwords, acceptable information carriers).

It is also worth indicating what should happen to the confidential information provided after the parties’ cooperation ends. These are issues such as, for example, data carriers on which confidential information was located and an indication of whether they will be subject to return, disposal, etc. It is also possible to require the parties to submit separate statements in connection with the return of documents or media containing confidential information (e.g. specifying that these are the only copies on which this information has been recorded).

2.5. Specifying the duration of the confidentiality obligation

The content of the NDA should indicate how long the confidentiality obligation applies to. It may concern the duration of the main contract in connection with which the NDA is signed, or the duration of negotiations or cooperation between the parties. In practice, most often this period is also extended for the time after the termination of the contract (end of negotiations or cooperation of the parties).

2.6. Indication of what behavior constitutes a breach of the confidentiality agreement

The agreement may also specify the type of behavior that will be considered as a breach of the confidentiality obligation, as well as indicate the required course of action of the party in case of such a breach. In this event, it is possible to introduce a requirement to inform the other party of the breach of the confidentiality obligation or to take action to prevent further breaches or remove the effects of existing breaches.

2.7. Determining the consequences of breaching the confidentiality obligation

NDAs often also contain provisions that define the consequences of a breach of the confidentiality obligation. The related consequences may take the form of contractual penalties, provisions regarding supplementary compensation or termination of the main contract (termination of cooperation, negotiations).

2.8. Indication of exclusions from the confidentiality obligation

Finally, NDAs commonly feature clauses outlining situations in which a party is exempt from maintaining confidentiality, such as when obligated to provide information to a public administration body operating within the limits of the law and its authority. It is advisable to include provisions in the contract obligating the party to whom information is disclosed to inform the disclosing entity of such instances and ensuring the possibility of reaching an agreement with the other party regarding the extent of confidential information disclosed.

In modern legal transactions, concluding a confidentiality agreement has become a standard and good practice proving to the legal awareness of a given entity. It is worth remembering that such an agreement makes sense if it takes into account the actual situation of a given entrepreneur or company and the type of confidential information actually produced.

The main benefit of concluding an NDA is the protection of the confidential nature of the information specified therein. The NDA is one of the means of legal protection of resources such as: know-how, business strategy, financial data, development vision, economic cooperation and many others. Its conclusion may significantly facilitate the pursuit of claims related to unauthorized breach of the obligation to maintain the confidentiality of the most valuable information for the entrepreneur.

Joanna Lubecka
attorney