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Non Disclosure Agreement & Its Benefits

Non Disclosure Agreement (NDA)

A Non Disclosure Agreement is a legal contract where the signatories promise to not reveal confidential information to a third party. The participants of the agreement aimed at serving specific purposes and agreeing to exchange secret information. The violating party can be held accountable for financial damages.

Benefits of Non-Disclosure Agreement are as follows:

  • Helps in Protecting Secrets

The main objective of NDA is to protect employees from sharing confidential information and also help in protecting trade secrets when information is shared during the regular course of business.

  • Helps in Enforce Consequences

The NDA helps in having legal recourse that the contract can be broken through the unlawful dissemination of confidential information and consequences for breaching trust.

  • Preserving Business Relationship

An NDA gives safety to confidential information and consequences for breaching the agreement, misunderstandings, etc.

  • Establishment of Employee Expectations

An NDA protects business information and has consequences for employees violating the NDA. A well-drafted and detailed NDA helps in guiding and handling trade secrets.

Types of Non-Disclosure Agreements are:

1. Mutual Agreement

The two businesses when discussing the possibility of partnering with each other then each company has to disclose information about the operations for informing the capabilities. In this agreement, both parties agree to not disclose information because each side receives sensitive information.

2. Non-Mutual Agreement

The agreement applies to the new employees when they are accessible to sensitive information. In such an agreement, an employee signs the agreement for preventing sharing of confidential information. The multilateral agreement is made in case of more than two parties for protection in case of disclosure of information. There is software acting as layers of protection from using confidential information.

3. Disclosure Agreement

Individuals are signing the opposite of a Non-Disclosure Agreement like in the case of a Doctor. He can ask a patient to sign an agreement for the patient's medical details to be shared with an insurer.

The Non-Disclosure Agreement consists of the following clauses:

  • The name of the parties and the number of parties which show unilateral, bilateral, or multilateral.

  • Confidential Information is defined in this clause. The information available in the public domain is exempted from the clause.
  • The period of the agreement
  • Rights and liabilities of the parties 
  • Right to sue in case of breach of the agreement and providing contractual remedies to the parties.
  • Compensation in Damages or Injunction against the use of confidential information.
  • Mediation or Arbitration Clause i.e., out-of-court settlement using a third party.

The importance of entering into a Non-Disclosure Agreement is:

  • Business Needs
  • Due Diligence
  • Collaboration
  • Employment Contracts
  • Franchising Opportunities


The Indian Contract Act of 1872 is the governing act for the contract to agree to not disclose confidential information. This agreement has provided many benefits to the company at a low cost and clarity of information that is shared.