The content of a NDA and the structure of a non disclosure agreement (NDA) typically follows a standard format. A non disclosure agreement is a legally binding contract that establishes a confidential relationship between parties. The primary purpose of an NDA is to protect sensitive information shared during business transactions.

When is NDA typically used 

Non disclosure agreements are typically used in situations where confidential information, like trade secrets, proprietary knowledge, or other sensitive data, needs to be shared for business purposes but should not become public. In procurement, NDAs are often used in the following scenarios:

• Vendor Evaluations: When assessing potential suppliers, an NDA ensures that any proprietary information shared about products, services, or business practices remains confidential. The NDA is typically sent in step 4 or step 6 of the Sourcing process. Very common application of the NDA:
• Product Development Partnerships: If a procurement project involves collaborative product development, NDAs protect the intellectual property and innovative ideas contributed by each party.
• Due Diligence Processes: When conducting due diligence, an NDA safeguards any confidential information uncovered about a company’s operations, financial status, or legal affairs. Not very common in procurement departments

By implementing NDAs, companies can exchange necessary information without the risk of losing control over their proprietary data, maintaining a secure and trust-based business environment.

The content of a NDA

The content of a NDA and the structure of a non disclosure agreement typically follows a standard format, which includes the following key elements:

• Introduction:
  • The introduction sets out the purpose of the agreement, which is to protect confidential information from being disclosed to third parties. It also identifies the parties to the agreement, i.e., the person or company sharing the confidential information (the “Disclosing Party”) and the person or company receiving the confidential information (the “Receiving Party”).
• Definition of Confidential Information:
  • The NDA will define what types of information are considered confidential and covered by the agreement. This can include trade secrets, intellectual property, business strategies, financial information, customer lists, and other sensitive information that the Disclosing Party wishes to protect.
• Obligations of the Receiving Party:
  • The NDA will set out the obligations of the Receiving Party, which typically include a requirement to keep the confidential information secret and not to disclose it to third parties without the prior written consent of the Disclosing Party. The NDA may also require the Receiving Party to limit access to the confidential information to a specific group of people or to take other measures to ensure its confidentiality.
• Exclusions from Confidentiality:
  • The NDA will often include certain exclusions from the definition of confidential information. For example, information that is already in the public domain, information that was lawfully obtained from a third party, or information that the Receiving Party can show was independently developed without reference to the confidential information.
• Term of the Agreement:
  • The NDA will specify the term of the agreement, i.e., the period during which the Receiving Party is bound by the obligations of confidentiality. The term may be for a fixed period of time or may continue indefinitely.
• Remedies for Breach:
  • The NDA will typically set out the remedies that the Disclosing Party may seek in the event of a breach of the agreement. This may include injunctive relief to prevent further disclosure of the confidential information, as well as damages for any losses suffered as a result of the breach.
• Governing Law and Jurisdiction:
  • Finally, the NDA will specify the governing law and jurisdiction that will apply to the agreement. This is important in the event of a dispute, as it determines which court will have jurisdiction over any legal proceedings.

Here’s an example Non Disclosure Agreement (NDA) for educational purposes:

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Non Disclosure Agreement (NDA)

Parties:
This Agreement is made between [Company Name], with its principal place of business at [Company Address] (“Disclosing Party”), and [Recipient Name], located at [Recipient Address] (“Receiving Party”).

Confidential Information:
The Disclosing Party agrees to provide certain confidential and proprietary information (“Confidential Information”) related to [Project/Subject].

Obligations of the Receiving Party:
The Receiving Party agrees to:

1. Not disclose Confidential Information to third parties.
2. Use Confidential Information solely for the purpose of [Purpose].

Exclusions:
Confidential Information does not include:

• Information that is public knowledge.
• Information disclosed by a third party without a breach of confidentiality.

Term:
This Agreement remains in effect for [Time Period], or until terminated by either party with written notice.

Governing Law:
This Agreement shall be governed by the laws of [State/Country].

Signatures:
Disclosing Party: _____________
Receiving Party: _____________
Date: _____________

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Explanation:
An NDA is used to protect sensitive information shared between parties. It outlines the scope of what is considered confidential, obligations to protect this information, and the duration of the agreement.

Conclusion – content and application of a NDA

In summary, the structure of a non disclosure agreement is designed to clearly define the confidential information being protected, the obligations of the Receiving Party, and the consequences of a breach of the agreement. By following a standard format, NDAs provide a clear and enforceable legal framework for protecting sensitive information.

Learn How to Source recommend Jon Kihlman as legal adviser and the bundle International Sales Law for Procurement Professionals by Jon Kihlman.

Note: Illustration to the blogpost “Non Disclosure Agreement (NDA)- part of the sourcing process” was created by Chat-GPT on Sept 26, 2024. Specifically note the spelling 🙂 .