THE MOST COMMON MISTAKES WHEN CONCLUDING NDA AGREEMENTS
In one of our earlier texts we dealt with business secrets, their protection as well as liability in case of its violation.
We will dedicate the following lines of this text to confidentiality agreements (so-called NDA agreements), i.e. the mistakes that we most often noticed in working with clients especially from the IT sector.
We agree that the easiest way is to take the model of confidentiality agreement that you used earlier for another project and simply copy its provisions into the new agreement that you need for another type of legal business. However, this practice can result in irreparable damage to your business.
Namely, it often happens that a specific contract is made in accordance with the law of another state, that it is made for other contracting parties and that it was originally used for a legal transaction with which there is no resemblance to a legal transaction foe which you are concluding it now. Without professional adjustment, such a contract would lead to a situation where it could not be enforced or you would not be able to obtain legal protection in the event that your company’s confidential information falls into the wrong hands.
It often happens that confidentiality agreements are “downloaded” from the Internet and their content cannot be applied at all or to a greater extent to the project that should be the subject of the agreement. In such cases, we come to situations where the contract is signed by a person who is not authorized for signing it. Namely, in order for the contract to produce legal effect, it is necessary for it to be signed by a person (one or more of them) who are authorized to do so by law, statute or decision of the company. Therefore, before you send the contract for signing, you should check which person or persons are authorized to sign it and in which positions they are, depending on the country in which your contract party is based as well as his internal acts.
Furthermore, no distinction is often made between unilateral and bilateral confidentiality agreements, i.e. whether the disclosure of confidential information will go in one direction or whether both parties will disclose confidential information to each other. Before you get a confidentiality agreement from your contractor, which will usually be one-sided, consider whether certain aspects of your business that you will disclose in a particular project must be confidential. In the case of an affirmative answer, the confidentiality agreement should be bilateral.
The confidentiality agreement should clearly stipulate the permitted ways of using business secrets, and depending on the case, in that sense, your business secret may fall into the wrong hands if you practice the “copy-paste” model. Namely, the recipient of a business secret must have the right to disclose confidential information to its employees to the extent necessary to perform their work tasks related to the project itself. It often happens that the contractor is limited only to employees or persons who are employed, however, you should keep in mind and determine whether your contractor has external associates with whom he has concluded other types of contracts (usually a contract on business technical cooperation) to which confidential information could be disclosed.
These are just some of the mistakes we noticed in working with clients when analyzing confidentiality agreements. Such agreements require special attention since they raise far more complex legal issues, and in that sense you should not neglect the provisions relating to the duration of the contract, penal provisions, the manner of resolving disputes and applicable law, etc., all with the aim of best protection of your business.