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Exceptions and Limitations in Non-Disclosure Agreements

BY: India Contract | Category: Technology | Submitted: 2010-09-19 16:16:04
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Article Summary: "A Non-Disclosure Agreement, or a NDA, is a legally binding agreement between parties, according to which one or more of the parties obligates not to disclose information delivered to it by another party or parties..."

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Non-Disclosure Agreement, or a NDA, is a legally binding agreement between parties, according to which one or more of the parties obligates not to disclose information delivered to it by another party or parties.

A Non-Disclosure Agreement is usually singed when several parties wish to pursue a mutual business purpose and recognize that there is a need to disclose to one another certain information (such as pricing, technical information, information about clients and vendors, etc.), relating to the business purpose. Usually this information must be reveled in advance since it is necessary to evaluate the potential arrangement.

Some parties sign an unconditioned and unlimited non-disclosure agreement without being aware that they have a reasonable interest and right to limit their obligation.

In this article, we will count the main limitations used, in our personal opinion, in non-disclosure agreements.

A usual limitation article in a Non-Disclosure Agreement will begin with a general statement be that ensures that any obligation contained in the Non-Disclosure Agreement is subject to the limitations.

A possible wording may as well be as follows: "The foregoing restrictions on disclosure of confidential information shall not apply to information that the Receiving Party can demonstrate that...".

Following the general statement, you will find the detailed limitations of non-disclosure, as demonstrated below (for convenience of reading, the parties shall be referred to as "Disclosing Party" and "Receiving Party"):

1. Information that the Receiving Party independently developed without reference to the information received from the Disclosing Party;

2. Information that the Receiving Party received by without restrictions;

3. Information that has become generally available to the public not due to a breach of obligations of the Receiving Party;

4. Information that was in the Receiving Party's possession or was known by the Receiving Party at the time of disclosure;

5. Information that will be the subject of a legal subpoena or any other lawful demand of an authorized authority or government.

This limitation may also state that the Receiving Party has to give the Disclosing Party a prompt notice of such demand for disclosure and reasonably cooperates with the Disclosing Party's efforts to secure a protective order;

6. Information that will be disclosed with the prior consent of the disclosing party;

7. Information that was in the possession of the Receiving Party or known to it by being in its use or possession prior to receipt from the Disclosing Party;

8. Information that the Receiving Party obtains from a third party (other than the Disclosing Party) without breach by such third party of an obligation of confidentiality towards the Disclosing Party.

An important issue in any limitation clause in an agreement is the issue of burden of proof. Should you be the disclosing party it would be your best interest to emphasize that the party seeking the benefit of a limitation shall bear the burden of proving its existence.

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Comments on this article: (1 comments so far)

Comment Comment By Comment Date
great article. very importanat. iwas not aware of all the exceptions. thank you! shiti 2010-09-20 22:28:13 333

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