Your Guide to Non-Disclosure Agreements in Singapore
What is a Non-Disclosure Agreement?
A non-disclosure agreement (NDA) is a legally binding contract between a provider and recipient of confidential material, knowledge or information. It is an undertaking not to disclose such confidential information covered under the agreement.
NDAs are common in many corporate settings where sensitive information must necessarily be disclosed in the course of business, but at the same time, confidentiality of such disclosed information is essential (e.g. employer-employee, buyer-seller in potential mergers).
Types of Non-Disclosure Agreements
There are two types of NDAs: unilateral and bilateral.
A unilateral NDA is an agreement in which one party agrees not to disclose certain information of another. This is the more common form of NDA of the two. For example, a business owner may require his employees to keep the company’s trade secrets under wraps.
A bilateral NDA is an agreement in which both parties agree not to share the other’s information. A bilateral NDA is entered into when there is an exchange, rather than a one-way disclosure, of confidential between the parties. For example, two businesses entering into a joint venture may each require the other party to keep its company’s sensitive information strictly confidential.
Function of Non-Disclosure Agreements
The primary function of NDAs is to protect sensitive information which is not generally known to the public. An example is the trade secret, which companies must take steps to protect.
There is no restriction to the type of information which can be protected under an NDA; it is up to the parties to decide exactly what confidential information should be covered under an NDA.
Some examples of information protected under an NDA include:
- Customer or client databases
- Sales and marketing plans or techniques
- Schematics for an invention
- Unique manufacturing processes
- Software, passwords and system specifications
By signing an NDA, parties are obliged not to divulge or release confidential information disclosed to them to other third-parties or to the public domain. Disclosing confidential information covered under an NDA constitutes a breach of contract for which the injured party can claim damages.
Specifically in a scenario where a new product or technology is being developed, an NDA also protects intellectual property (usually patent) rights, which can be voided by public disclosure of a new invention.
What Terms will a Non-Disclosure Agreement Contain?
NDAs generally contain the following essential terms:
(1) Scope of agreement
Definitions of confidential information which is to be covered under the NDA, as well as exclusions of certain information from protection set out the scope of the NDA. Both spell out, in considerable detail, the categories or types of information which are or are not covered by the NDA.
Typically, exclusions apply to:
- Information attained from another source
- Information generally available in the public domain
- Information required by law or any other competent authority to be disclosed
- Information to which the recipient had prior knowledge of
Key particulars of the parties to the agreement are also outlined.
(2) Parties’ obligations
The body of an NDA lays out the legal obligations which the recipient of the confidential information must abide to. Such obligations set out the restrictions and prohibitions in the usage of the confidential information by the recipient.
Commonly, the NDA will provide that disclosure of confidential information to selected individuals (e.g. employees, agents, officers, representatives etc.) to whom disclosure is necessary in the ordinary course of business, is permissible. A duty of confidence is may also be imposed upon the recipient in some NDAs.
It is also commonly provided that no originals or copies of the confidential information shall be retained after the expiry of the contractual term.
(3) Time periods
The durations of the NDA and the term of confidentiality are always included in an NDA.
The term of confidentiality may extend beyond the duration of the NDA. If so, it is usually limited to 3 to 5 years, within which the recipient must not disclose any confidential information disclosed to him.
(4) Operation and effect of the agreement
Typically, an NDA will include a provision stating that the NDA does not operate to grant or transfer any rights or license to the recipient.
(5) Miscellaneous terms
Lastly, an NDA also incorporates other general contractual terms, including but not limited to:
Non-Disclosure Agreement Template
Need an NDA template? You can get one for free here.
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