A Non-Disclosure Agreement ("NDA") is a legally enforceable agreement that falls under the ambit of the Indian Contract Act, 1872, which serves as the umbrella legislation for all contracts and agreements. This agreement protects and maintains the confidentiality of vital information disclosed between the parties, including trade secrets.
NDAs are also known as a confidentiality agreement (CA), confidential disclosure agreement (CDA), proprietary information agreement (PIA), secrecy agreement (SA), or non-disparagement agreement.
The NDA prevents the disclosure of a company's trade secrets or sensitive information to competitors or unauthorised parties who could use the knowledge to cause irreparable harm to the disclosing party. When they sign the agreement, the disclosing party and the receiving party agree on what constitutes confidential information and what does not.
NDAs preserve the confidentiality of information provided between parties and safeguard the business's intellectual property. Typically, the initial round of talks requires the disclosure of numerous sorts of information. This mandates that the parties remain committed by the NDA and refrain from violating it, as doing so may have legal repercussions.
What happens if you break a non-disclosure agreement?
A breach of an NDA is a civil wrong. NDAs are legally enforceable contracts. When parties sign an NDA, the party receiving the confidential information must keep it secret. If the receiving party chooses to divulge confidential information to an unauthorised third party or entity, the party will incur legal consequences or penalties.
In addition to obligating the parties to keep secret information private, NDAs offer legal remedies and penalties for any breach of the agreement, such as injunctions, indemnification, etc. In addition to injunctive remedies, breaches of NDAs can result in substantial monetary fines. Before signing a non-disclosure agreement (NDA), one should thoroughly review the document.
Why you should not violate a non-disclosure agreement?
NDAs deter persons from disclosing sensitive information to third parties or the general public, and severe penalties accompany them. In many circumstances, the agreement will specify the consequences of breaking the NDA. The following are some instances of penalties for violating an NDA: injunction, indemnity, damages, termination from employment, loss of business reputation, clients, etc.
A NDA would typically contain language that would entitle the Disclosing Party to resort to any legal remedies it deems fit. Such wide language in itself should sound a warning bell to the Receiving Party. It is better to comply with confidentiality obligations than breach a NDA.
Non-Disclosure Penalty Clause
It can be difficult to quantify the losses caused by a breach of the secrecy provision; thus, it may be advantageous to include a penalty clause that specifies an acceptable amount for the damage caused by a breach of contract. If the penalty is already mentioned in the contract, there will be a fear of having to pay substantial damages, which would not exist if the party intended to rigorously adhere to the contractual commitments.
The penalties for violating the agreement are often laid out in the agreement, including injunction, indemnity, and damages. It is essential to mention that the Specific Relief Act of 1963 and the Code of Civil Procedure, 1908 govern these preventive reliefs.
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Injunction
The non-breaching party may petition the court for an order prohibiting the Receiving Party from disclosing the secret information. The objective of requesting a temporary or permanent injunction is to prevent the defendant (the Receiving Party) from committing future violations or inflicting further injury to the aggrieved party (the Disclosing Party).
Indemnity
The Receiving Party must indemnify the Disclosing Party for any fees, expenses, or damages incurred by the Disclosing Party due to any breach of this Agreement's provisions. Court fees, litigation costs, and actual, reasonable attorney's fees are all included in this obligation.
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Damages
If the Receiving party violates an NDA, the Disclosing Party may file a lawsuit in court to prohibit additional disclosures and sue the violating party for monetary damages.
In conclusion, non-disclosure agreements (NDAs) are low-cost, simple-to-create, legally binding contracts that keep private information confidential between two or more parties. When establishing an NDA, it is crucial to be as clear as possible so that all parties understand what information can and cannot be divulged, as well as the consequences for doing so. A contract may be null and unenforceable if the language is unduly broad, unreasonable, or burdensome. The courts will also contest or nullify contracts that are overly broad, oppressive, or attempt to contain non-confidential information. In addition, if the material is made public, the Disclosing Party is unable to enforce the NDA.
Always consult a lawyer before signing a nondisclosure agreement. Be on the lookout for onerous clauses and exercise extreme caution before signing.
Consequences of violating a non-disclosure agreement (NDA)
Breach of a non-disclosure agreement (NDA) may result in legal action, such as a lawsuit, for breach of contract. Damages might vary depending on the agreement's terms, the gravity of the breach, and the magnitude of the harm inflicted. In addition, breaking a non-disclosure agreement can destroy a person's reputation, trustworthiness, professional relationships, and future employment opportunities.
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