We have written separately about what a non-disclosure agreement (NDA) is and when they should be used. We also mentioned some of the key provisions that an NDA should cover. In this article we look specifically at the Inform Direct template NDA.
First, the Inform Direct NDA is drafted as a unilateral agreement. By this we mean that one party with confidential information will be sharing it with an entity which will not be sharing anything confidential in return. A unilateral agreement like this might well be used by a company seeking investment. Potential investors generally want sight of financial information which will not be in the public domain. The company seeking investment will know that they would be unlikely to secure investment without first sharing confidential information about revenue and costs etc. They will want to protect themselves from the financial information they share being exploited or shared with other parties. They would do this by putting in place an appropriate NDA such as the Inform Direct template.
The Inform Direct NDA
The Inform Direct NDA protects confidential information with up-to-date wording written by a company law specialist. Purchase and download for unlimited use.
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What is the confidential information being shared?
One of the most important items to define in any NDA is what the confidential information being shared actually comprises. Rather than having an exhaustive list detailing every item of information, the modern preference (and the approach adopted by Inform Direct in their template NDA) is to simply define the ‘purpose’ i.e. the purpose for which the confidential information is being disclosed and the ways in which the recipient may use it. It defines as confidential information anything supplied which relates to the purpose.
So, in our example of a company seeking investment, the purpose could be defined as “to evaluate participation in the Series B investment round”. If having signed the NDA the potential investor was supplied with sales forecasts to help them make an investment decision then the sales forecasts would be deemed confidential information. If further information was subsequently requested, say concerning competitor analysis, then this further information would also be included in the definition of confidential information provided it was being supplied to evaluate participation in the Series B investment round.
It is important to note that information already known to the recipient or information already in the public domain would be excluded from the definition of confidential information.
Duration
NDAs are by their nature usually temporary arrangements which will either result in an outcome such as an investment being made or the parties concluding, notwithstanding the confidential information being shared, that there is no deal to be struck. Neither party wants an open-ended agreement so the Inform Direct NDA is drafted so that it comes to an end once the purpose is fulfilled or terminated by one party giving the other written notice. The NDA should set out what happens to any confidential information once the agreement has come to an end and how long the duty to maintain confidentiality endures post termination.
Equitable relief
The usual remedy for a breach of contract is damages, i.e. financial compensation to put the wronged party into the (financial) position they would have been in had the breach not occurred. However, monetary compensation may not always be sufficient if the party which had shared confidential information wants it returned. The Inform Direct template NDA also provides for specific performance, injunctions etc without the need to prove special damages.
No partnership or agency
Quite often the size/substance of the two parties entering into an NDA are polar opposites. One may be a well-resourced investor and the other a fledgling company bootstrapping their way to break-even. It will be very important to the larger party that the act of signing the NDA does not trigger the establishment of any joint venture or give the smaller party any ability to represent that it has any authority to make any commitments on the other party’s behalf. The Inform Direct template NDA sets out these limitations very clearly so there can be no misunderstanding in this regard.
The Inform Direct NDA
Entire Agreement
Quite often there will have been some early-stage discussions between two parties in the period before any NDA is signed. It is good practice to state (and the Inform Direct template NDA does this) that this new agreement supersedes all previous agreements, understandings and arrangements. This avoids the complications that could occur of any party referring to a previous agreement.
Costs
The Inform Direct template NDA states that each party shall pay its own costs incurred in the negotiation, preparation and performance of the agreement. In this regard it is important that the drafting and length of document is such that either party would be comfortable signing it without feeling compelled to take legal advice. The Inform Direct template NDA has been drafted in this manner and the respective obligations are not weighted in favour of either party.
If you think the Inform direct template NDA would suit your situation you can purchase and download a copy.
