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What is a non-disclosure agreement (NDA) and how to use it correctly

Why do companies enter into non-disclosure agreements (NDA)? What information is confidential? What happens if one of the parties violates the Agreement? How to prove NDA disclosure? The director of the legal company “RESOLVA Consult” Lyudmila Tsarik answered all these questions especially for “Pro Business”.

Lyudmila Tsarik
Director of the law firm “RESOLVA Consult”

What is an NDA for?

A non-disclosure agreement (NDA) is a guarantee for a business against dishonest behavior of a counterparty, client and employee.

As a rule, these are contractual “restrictive covenants” – conditions that limit the ability of one party to take certain actions. Such agreements are widely used in international law and foreign economic activity. In the IT sector, such a condition is expressly provided for in the Non-Compete Agreement. And these conditions are also directly included in the economic agreements of HTP residents (according to the Decree of the President of the Republic of Belarus dated December 21, 2017 No. 8 “On the development of the digital economy”).

A non-disclosure agreement may be part of another type of agreement, agreement, contract, or act as a separate agreement. As a rule, lawyers advise to provide a separate clause in the main contract, and set out the detailed conditions in a separate agreement, which will be devoted to issues of working with confidential information.

What does confidential information mean?

Confidential information is information that is not known to a wide range of people and is not easily accessible.

It includes:

  • personal data;
  • correspondence in any form between the parties to the contractual relationship;
  • financial data and other data related to the project (agreement), namely: financing issues; a list of contractors, clients and partners, licensors or licensees, intermediaries with whom the party works; payroll of employees; marketing and promotion information; trademarks and other objects of intellectual property rights; databases and other objects in the IT sphere; other.

What disclosure is considered acceptable (lawful)

There is information, the disclosure of which is considered acceptable:

  • information (data) that is not directly indicated or listed;
  • data subject to disclosure by the written consent of the confidential information party.

It is important to single out the procedure for disclosure in the NDA in the event of a request from a government agency. If a party to the contract receives a request, it is obliged to inform the other party about it, and does so before sending a response to the state body.

NDA violation

What happens if one of the parties violates the non-disclosure agreement? The choice of method of influence to resolve such a dispute depends on the legal location of the company and its financial capabilities.

It could be:

  • collection of fines and damages,
  • compensation for harm
  • protection of the company’s business reputation in order to protect the business from financial losses and conflicts in the future.

The positive reputation of the counterparty always plays an important and decisive role in the conclusion of the transaction, including the impact on the implementation of the Non-Disclosure Agreement.
The choice of remedies and the legal consequences of an NDA violation depend on whether the subject of the violation is an employee or counterparty. It is also necessary to consider whether the disclosed information is a trade secret or other confidential information.

Failure by the counterparty to fulfill its obligations not to disclose confidential information may become the basis for the application of civil liability measures. The right to recover damages caused by the disclosure of confidential information (not necessarily related to a trade secret) follows from the general principles and provisions of civil law.

How to Prove NDA Disclosure

The party against whom the rights under the NDA are violated will have to prove the existence of all four circumstances of the violation:

  • the fact of violation of the right of the party by disclosure of confidential information;
  • the guilt of the other party in the disclosure of confidential information;
  • the fact of causing losses and their amount;
  • connection between the fact of disclosure of confidential information and the losses caused.

Failure to prove at least one of the 4 facts entails a refusal to satisfy the violated rights.

Before signing a non-disclosure agreement, pay attention to the laws of which country it is governed by.

It is important to understand that the confidentiality agreement (NDA) is designed to protect the parties from spontaneous disclosure of information that may lead to financial or reputational damage, the latter may not be restored.

When working with a counterparty, the following is important:

  • the parties must act in good faith towards each other;
  • if you nevertheless violated the non-disclosure agreement, then you are prohibited from benefiting from this;
  • it is necessary to take into account the interests of the other party, even after the termination of the contract;
  • if you receive confidential information during negotiations with a counterparty and do not conclude an agreement, you are still prohibited from disclosing information.

Unfortunately, to date, it is not known for certain about the existing judicial practice in the Republic of Belarus in assessing the legality of such agreements and their implementation.

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My profession is a journalist, but my hobby for 8 years has been studying Forex investing and trading. During this time, I managed to gain extensive experience in investing and trading cryptocurrencies and double my capital in the Forex market. To be the author of this magazine, the site owners invited me to participate in one of the 2020 trading webinars, and I will try to reveal the most relevant crypto market news for you.

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