The rise of the NDA and what to do if there is a breach

In today's digital age, information can be shared globally with just a click. Once public, it's nearly impossible to retract. This reality has led to the increased use of Non-Disclosure Agreements (NDAs) to protect confidential information, maintain reputations, and preserve competitive advantages. NDAs are now commonplace in both corporate and private sectors, often making headlines when misused or breached.

When used correctly, NDAs are legitimate and invaluable tools. However, that is not always the case. The Solicitors Regulation Authority issued a warning in 2024, emphasising the importance of proper training and cautioning against over-reliance on templates when dealing with NDAs.

Below are some tips on using NDAs effectively and steps to take if a breach occurs.

What is an NDA?

An NDA is a contract where parties agree to keep certain information confidential. They are also known as confidentiality agreements (CAs), confidential disclosure agreements (CDAs), and proprietary information agreements (PIAs). NDAs are often part of a bigger picture, such as settlements, employment contracts or wider commercial transactions

Why are NDAs used?

NDAs might hit the headlines for hiding misconduct, but they serve many legitimate purposes:

• Protect sensitive information: NDAs prevent the sharing of business plans, trade secrets, and other confidential information.
• Clarify boundaries and build trust: Signing an NDA shows a commitment to confidentiality, helping to build trust and strong working relationships.
• Legal protection: Breaching an NDA has legal consequences, protecting the interests of the party sharing the information.

When to consider an NDA

Consider using an NDA in the following scenarios:

• Partnerships and collaborations: When sharing proprietary information, trade secrets, or business strategies.
• Employment: To ensure employees keep company information confidential during and after their employment.
• Client relationships: When clients will have access to sensitive data or business practices.
• Product development: When discussing new products or innovations with potential investors, manufacturers or partners.
• Sales, mergers, acquisitions, or tenders: To encourage transparency during significant business transactions.

Key provisions to look out for

• Scope: Clearly define what information is confidential. Ensure the definition is broad enough to protect interests but not so broad as to be unenforceable or impractical.
• Duration: Check how long the confidentiality obligation lasts. Some NDAs have specific time frames, while others require indefinite confidentiality.
• Permitted Disclosures: Identify any exceptions to confidentiality, such as disclosures to legal advisors or as required by law. Consider what use you might have for that confidential information during your relationship with the counterparty and check that this is permitted.
• Consequences of Breach: Understand the potential impact of a breach. Ensure the consequences are proportionate and sufficient to protect interests.
• Mutual vs. Unilateral: Determine if both parties need to protect information. If so, use a mutual NDA.
• Return or Destruction of Information: Check for requirements to return or destroy confidential information after the agreement ends.

Steps to take if you suspect a breach

An NDA is legally binding, and a breach can lead to a claim for breach of contract. If you suspect a breach, act swiftly:

• Reach Out: Seek legal advice promptly to mitigate the impact of the breach. Delays can count against you if seeking injunctive relief.
• Review: Revisit the contract to confirm if the information in question is confidential and if any authorised disclosure provisions apply. Are there relevant points on timing? Has the document been disclosed elsewhere, such that it loses its confidential designation?
• Rectify: Take steps to remedy the breach and mitigate its impact.
• Retain: Preserve any relevant evidence, such as emails and messages.
• Remedy: Understand that remedies may not put the parties back into the position before the breach – information cannot be removed from the minds of those who incorrectly received it.

Navigating NDAs requires a proactive approach – by ensuring all parties understand their legal rights and obligations, you can effectively protect your interests and mitigate potential risks.

Final Thoughts

NDAs are essential tools for protecting sensitive information in various contexts. They help businesses safeguard proprietary data, maintain competitive advantages, and foster trust in professional relationships. However, NDAs must be used responsibly to avoid stifling transparency.

Tailored legal advice should be sought before entering into NDAs to ensure they are used effectively and ethically. If you are interested in discussing any of the issues covered in this article, please do get in touch.

Co-author: James Roche

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at March 2025. Specific advice should be sought for specific cases. For more information see our terms & conditions.