Nondisclosure agreements have great practical significance, especially in establishing business contacts in order to cushion the risks associated with the (mutual) disclosure of internals. In practice, it is common for both sides to mutually commit to secrecy. However, it is also possible to agree on a unilateral secrecy agreement. When establishing business contacts, it is often necessary to disclose sensitive information in order to be able to describe the mutual benefits.

For example, a cloud provider may need to disclose the operation of its database system so customers
can decide whether the database is suitable for their purposes.

Content of confidentiality agreements

For NDAs, the principle of contract freedom applies. The parties are thus fundamentally free in the drafting of the contract. Non-disclosure agreements should contain as detailed rules as possible to avoid later disputes. It should be noted that the regulations may not be formulated too broadly. Otherwise, the limits to immorality or a violation of good faith can be quickly exceeded.

Excerpts from NDAs should include the following:

1. Definition of confidential information

For laymen it is often difficult to find a generally valid definition for confidential information. Nevertheless, it may be useful to develop such a definition. Some contract negotiations sometimes take months. In the meantime, it may turn out that more information must be disclosed than was originally thought. If the confidentiality agreement establishes a common definition of confidential information, no new NDAs need to be set up. The parties then also always have the certainty that they are moving within the framework of the NDAs.

Example of a general definition: “Confidential is any information that has been exchanged between the parties in writing and has been marked as confidential.”

2. Designation of confidential information

In order to avoid too much regulation, the most important confidential information in the non- disclosure agreement should be quoted verbatim. Thus, in the case of a dispute, the original intention of the parties can always be used.

Example: source codes, software, business plans, data carriers

It is also appropriate to present a preamble to the contract, which lists the objectives of the cooperation separately.

3. Designation of non-confidential information

In order to avoid the risk that the NDA has been formulated too narrowly and thus restricting the freedom of competition for a contractor too much, it should always be expressly agreed for clarification which information should not be treated confidentially.

Example: general knowledge, expertise, random knowledge

4. The use of confidential information

The agreement of a confidentiality agreement only makes sense if a detailed agreement is made, which specifies the concrete use of the information. Among other things, it is agreed how the use and transfer of the information to the employees of the contracting parties has to take place. It can be expressly regulated which employees may access the information. Often it works with different levels of confidentiality.

Example: High level of confidentiality – only senior management is allowed access to the information, Medium confidentiality level – The agents responsible for the specific service may be given access to the information, Low confidentiality – Secretariat staff may access the information.

5. Contract duration

There is no statutory regulation for the term of a non-disclosure agreement. If no contractual regulation is made on the duration of the contract, the NDA must be interpreted. If in doubt, the parties will seek an unlimited contract term. In individual cases, however, this can also constitute a disadvantage at the expense of one party. It is therefore always important to ensure that a reasonable contract period is specified.

6. Contractual penalties

Strong secrecy agreements are characterized by the promise of a contractual penalty in the event of a breach of secrecy. The background is that otherwise the causality and amount of the damage are hardly detectable for the person concerned.

7. Use of the knowledge in the event of non-conclusion of the contract

Frequently, problems arise when the contract negotiations do not lead to the desired cooperation. In practice, it is often the case that the parties have already developed common ideas or solutions during the course of contract negotiations. In such a case, concrete contractual arrangements are essential. The NDA can specify which of the contract partners such ideas, concepts or solutions belong to and who can continue to use them. However, it can also be agreed that both parties have rights to the ideas that have been developed and that both parties can use these ideas for their own purposes. recommended action

Confidential information is exposed to the risk of unintentional disclosure. In the age of the Internet, confidential information can be easily shared with millions of people. For this reason, confidentiality agreements are a useful basis for contract negotiations. Let legal advice help you to protect your confidential information.