Non-disclosure agreements (“NDA”) are contracts where a person agrees not to divulge, reveal or in any way publicize information. They are often used in the context of investors evaluating a business plan, business agreements, employer-employee relationships and independent contractor agreements. One party agrees to reveal information provided the party receiving the information keeps it a secret. The types of information subject to NDAs often involve strategies, trade secrets, customer contacts, market data and private analysis and research.
As with all contracts, the precise language of the NDA is crucial in that it sets the parameters as to what information/documentation cannot be disclosed and how long the obligation of secrecy remains in effect. Typically, moreover, there are provisions that exempts certain classes of information from non-disclosure, including information which was already known by the party receiving the information or information which is generally known or readily known by third-parties or the public. These exception provisions are very important.
What happens when someone violates a NDA? Depending on the language in the NDA, there can be penalties or liquidated damages that may be levied if there is indeed a violation. If the circumstances warrant it, a temporary restraining order, preliminary injunction and/or permanent injunction may be appropriate if the disclosure has resulted or will result in irreparable harm. Furthermore, there are usually attorney fee and court cost clauses in NDAs which award a prevailing party its litigation expenses. Because enforcement of a NDA in court is essentially a breach of contract case, the typical rules governing contract litigation apply. NDAs often relate to very sensitive and valuable information. As such, if there is a violation, immediate attention needs to be given to any possible breach.
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