7 Key Points to Consider When Drafting a Non-Disclosure Agreement (NDA)
Non-disclosure agreements (NDAs) play a crucial role in protecting confidential information, especially in business relationships where sensitive data is exchanged. However, many people overlook important legal and practical details when preparing these agreements. A well-drafted NDA should clearly define the parties involved, the scope of the confidential information, the permitted use, the duration of the obligations, applicable law, and potential consequences in the event of a breach. In this blog, we highlight the most important elements you should pay attention to when drafting or reviewing an NDA.
- Clearly Identify the Parties
As with any legal agreement, an NDA must begin by clearly identifying all parties involved. For individuals, include full names and contact details; for companies, use the full legal name, registered address, and, if applicable, company registration number. It is also important to ensure that the person signing the NDA has the proper authority to represent the entity they are signing on behalf of.
- Define What Constitutes “Confidential Information”
Arguably the most essential part of the NDA is how it defines “confidential information.” If the definition is too narrow, some sensitive data may fall outside the agreement’s protection; too broad, and enforceability may become problematic. A good definition will outline the types of information covered (written, oral, visual, electronic, etc.) and, where appropriate, include concrete examples relevant to the specific industry or project.
- Purpose and Permitted Use of Information
The NDA should clearly state the specific purpose for which the confidential information is being disclosed. For example, is it for the evaluation of a potential partnership or investment? Can the information be shared internally or with consultants? Clarifying these aspects in advance can help avoid disputes later on.
- Duration of the Agreement and the Confidentiality Obligation
It is important to distinguish between the term of the agreement itself and the period during which the confidentiality obligation applies. The NDA may be valid for one year, while the obligation to keep information confidential could last for five years. Be explicit about both timelines to avoid ambiguity.
- Exceptions to Confidentiality
Well-drafted NDAs also include exceptions—information that will not be considered confidential. Typical examples include information already in the public domain, information independently developed by the receiving party, or disclosures required by law or court order. These exceptions should be clearly and carefully articulated in the agreement.
- Governing Law and Jurisdiction
If the parties are located in different countries or legal jurisdictions, the NDA must specify which country’s laws will apply and which courts will have jurisdiction in case of a dispute. In international agreements, omitting this clause can lead to complex legal challenges.
- Consequences of Breach and Penalty Clauses
An NDA should outline the consequences of a breach. Will the disclosing party be entitled to claim damages? Is a specific penalty or liquidated damages clause included? While such provisions can strengthen the agreement’s enforceability, they must be proportionate and legally valid under the chosen jurisdiction.
Conclusion
A carefully drafted NDA forms the foundation of trust in business relationships where confidential information is exchanged. It not only protects sensitive data but also ensures that both parties understand their rights and obligations. Relying on templates or boilerplate text without tailoring the terms to your specific situation can expose you to unnecessary legal risk.
If you are unsure about how to draft or assess an NDA in your particular situation, or if you have questions regarding contract law in general, please don’t hesitate to contact us. Our specialists would be happy to assist you.
You can reach Ms. Willeke Krieger directly at krieger@tlcadvocaten.nl, or contact our offices at +31 53 3033000 (Enschede) or +31 523 745640 (Hardenberg). You can also email us at info@tlcadvocaten.nl.
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