The competition has increased over time with the globalizing world and increasing business volume. All kinds of legal relations, especially commercial and business, brought the need for confidentiality. This article will explain the scope and points to be considered of a non-disclosure agreement (“NDA”).
1. What is Confidential Information?
Confidential information; can shortly be explained as “an information disclosed verbally and/or in writing, electronically and/or by other means between more than one party”. The context of the information can be; legal, financial, commercial, employee-employer information, employment policy and/or any other information considered “confidential” by one and/or one of the parties. Confidential information can be also comprehensive in nature (e.g. data obtained in studies, processing and reports), while it can be also a single piece of information (e.g. a chemical formula). The nature of the confidentiality of the information is directly related to the subject of the contract and it is not possible to reduce it to a single generally accepted definition. Confidentiality can be regulated in the main contract, or it can be protected by a separate confidentiality agreement.
2. What is a NDA ( “Non-Disclosure Agreement”) ?
NDA is a separate but complementary agreement that regulates the scope and exception of confidential information, e.g. the obligations of the parties in this regard and possible legal sanctions in case of disclosure. The constituent element of the NDA is “confidential information”. For this reason, the definition of confidential information should be made carefully and unnecessary expressions should not be included. It should be emphasized that the NDA can be prepared freely within the scope of the freedom of contract, therefore it will be beneficial for all parties to prepare a contract with clear expressions and limits.
2.1. Exceptions to Confidential Information
Confidential information, which may vary according to each business relationship, has exceptions that can be said to be general. Accordingly, but not limited to the following, in the presence of one of these situations, the information no longer has the feature of being "confidential" and therefore does not become contractually binding. Exceptions may also be occur according to the demands of the parties.
a) Information already known to the public at the time of disclosure,
b) Information that becomes public at a later date without breach of contract terms and/or without faulty action by the relevant party,
c) Information to be disclosed pursuant to applicable laws or regulations or a court decision or administrative order,
d) Information that can be disclosed with the consent of the parties
e) Information obtained from a 3rd party without obligation of confidentiality
2.2. Obligations of the Parties
The general regulation is that the parties will protect the confidential information and show the highest level of care and protection to avoid disclosure. The parties may regulate in detail of how this protection will be, or they may not foresee any regulation. The general practice - especially in companies- is on the fact that the confidential information within the scope of the commercial relationship will be protected by the employees of the parties and will not be disclosed in any way. Externally, the parties' claims regarding liability can be detailed separately in the contract.
3. Considerations
We mentioned that the NDA is a separate but complementary agreement. Bearing in mind that to draft a contract for each separate issue is not expected and practical, it is common to expand the scope of the contract with non-considentality elements. This expanding, if not done carefully, may cause also legal problems. We have listed below, not limited to the following, the three most common regulations. It should be emphasized that a careful review process is recommended as these issues may often be hidden within the contract.
3.1. Non-Reference Clause
The definition of “confidential information” should be clearly defined while preparing the contract. A non-reference clause covers not only the work subject to the contract, but also all service and/or business relationships that have occurred and/or may occur between the parties, by expending the scope of the confidential information in the contract.
3.2. Non- Compete Clause
A non-compete clause generally arises in employee-employer contract. İt is not only enables the confidential information learned during the execution of the job to be used in the future; but it may also cause the person under legal obligation to be unable to carry out professional activities.
3.3. Exclusivity
This regulation arises in case of a developed product and/or a service provided. With the exclusivity clause, it can be arranged that the contractual work and/or service be assigned to only one party during the contract. In this case, the party providing the exclusive service is likely to suffer victimization as it cannot meet the demand from third parties.
As a part of the contract law, NDA holds a significant place and importance. It is crucial for the parties to seek out a professional help in order to avoid any problems which may arise. 20. 09.2022
Att. B. Beril KARAMAN