Non-disclosure agreement (NDA): Everything you need to know

A confidentiality agreement, also known as a NDA (A non-disclosure agreement protects sensitive information, business secrets and confidential data. It ensures that both parties do not disclose this information to third parties and grants the owner of the secret the right to claim damages or contractual penalties if the agreement is breached. This article answers the most frequently asked questions about NDAs and explains when and why they are necessary.

What is an NDA?

An NDA is a written agreement between two or more parties stating that certain information must be treated confidentially. It is often used in business contexts to protect business secrets and specific know-how that could be disclosed during the collaboration. It secures Patents and other property rights including during contract negotiations. Unlike legally standardized trade secrets, an NDA offers contractual freedom so that the conditions can be individually designed.

What does an NDA say?

The content of an NDA varies depending on the purpose and scope of the project. However, the following points should always be included:

• Parties: Names of the parties involved.
• Purpose of the agreement: Description of the reason for confidentiality, such as protection of business secrets or customer relationships.
• Confidential information: Definition of information that is considered confidential.
• Confidentiality obligations: Clarification of the parties' obligations to maintain confidentiality.
• Return of confidential information: Regulation on the return or destruction of the information after the end of the cooperation.
• Duration of the agreement: Period of validity of the NDA.
• Contractual penalty and damages: Consequences of violations of the agreement.
• Applicable law and place of jurisdiction: Determination of the applicable law and place of jurisdiction for disputes.

When is an NDA necessary?

NDAs are useful in many business situations, for example:

• Protection of an idea before filing a patent application.
• Company mergers or sales.
• Confidential information between employer and employee.
• License negotiations.
• Cooperation with investors or service providers.
• Creation of software.

An NDA should be concluded before the actual negotiations begin in order to ensure that confidential information is not unintentionally disclosed to third parties.

Who has to sign an NDA?

An NDA is signed by all persons or organizations that have or could have access to confidential information. These can be business partners, employees, consultants or external service providers. The necessity and the parties involved should be examined individually.

What happens if you violate an NDA?

In civil law, it is often difficult to quantify the damage following a betrayal of a secret. A non-disclosure agreement offers relief here. The following can be agreed for a breach of the NDA:

• Contractual penalty: A predetermined sum to be paid in the event of a breach of the agreement.
• Damages: Compensation for the actual damage incurred, which must be proven in detail.

The cost of breaching a non-disclosure agreement can vary greatly and depends on various factors, including the contractual penalty set out in the NDA, the nature and extent of the breach and the damages incurred. The German courts consider contractual penalties of between €5,000 and €25,000 to be permissible.

What does an NDA cost?

The cost of an NDA varies depending on its complexity and scope. Free templates are available on the internet, but legal advice is recommended for customized and legally sound NDAs. The investment in a well-formulated NDA is often less than the potential follow-up costs in the event of a breach.

Conclusion

An NDA is an important contractual agreement for the protection of confidential information. It should be carefully drafted and customized to ensure legal certainty. Breaches of an NDA can have significant legal and financial consequences.

Frequently asked questions (FAQs)

What are the most important elements of an NDA? An NDA should include the parties, the purpose of the agreement, the confidential information, the confidentiality obligations, the return of the information, the duration of the agreement and the consequences of breaches.

When should I use an NDA? An NDA is useful if confidential information is exchanged with other parties during the collaboration and needs to be protected, for example in the case of business secrets or sensitive project data.

How long is an NDA valid for? The period of validity of an NDA can vary and should be specified in the contract. It can apply for the duration of a project or for a certain period after the end of the collaboration.

Who can break an NDA? Any party that violates the terms of the NDA may be held liable. This includes all signatories, including employees and external partners.

What are the penalties for breaching an NDA? A breach of an NDA may result in contractual penalties and claims for damages. The amount and type of penalties are specified in the contract.

Can an NDA be enforced in court? Yes, an NDA is a legally binding contract and can be enforced in court. Violations can lead to legal and financial consequences.

Do I need a lawyer to draw up an NDA? It is advisable to seek legal advice to ensure that the NDA is legally sound and tailored. Free templates can serve as a starting point, but are no substitute for the expertise of a lawyer.