Let us discuss reviewing a contract in the context of a Non Disclosure Agreement. This is the simplest contract that one can start working with.
An NDA is basically a contract between parties who are considering entering into a deal. They are sharing details about themselves which are confidential and it could hurt them if they are leaked.
I’ll give you some examples:
- Apple entering into discussions with Foxconn to create a new design for a phone,
- an investor obtaining the business plan and details of a startup before deciding whether to invest,
- two companies sharing business information and future plans to decide whether they can enter into a joint venture
1 The first thing we need to check is who does the confidentiality apply to. Imagine this clause:
The Investee Company shall have the obligation not to disclose any Confidential Information.
If the parties were entering into a joint venture, how would you change this?
Both Parties shall have the obligation not to disclose any Confidential Information.
2 You will need to see how confidential information is defined.
For example, consider the following clause:
All information exchanged by the parties pursuant to the transaction, including any plans, oral or written communication, whether specifically mentioned here or not, shall be designated as Confidential Information.
You will need to ensure that there are certain basic exceptions:
The Parties acknowledge that Confidential Information shall not include any information that:
(a) is now or subsequently becomes publicly known or available without breach of this Agreement;
(b) was previously in the possession of a party without any obligation of confidentiality;
(c) is required to be disclosed by law.
3 What is publicly known information?
If one of the parties has been exploring potential deals with other collaborators as well, they would come to know quite a bit of information about other businesses. Is that publicly known information? No.
You will clarify what publicly known information is: Confidential information is not publicly available merely because it is known to a few people to whom it may be of commercial interest, unless it has been filed or published officially, or generally known.
4 Ensure that IP rights are clarified
All Confidential Information disclosed pursuant to this Agreement shall be and remain the property of the party which is disclosing it, and it does not grant any intellectual property right ownership or license to the receiving party.
5 Next, let’s look at one of the biggest mistakes that we see in every 2 out of 5 draft NDAs: The remedy clause!
In the event of a breach by the Receiving Party, the Disclosing Party shall be entitled to sue the Receiving Party for specific performance of this Agreement.
Say, a director’s conversation over a smoke break was with a rival company’s officer instead of the canteen boy, and the rival company spread the information online.
How will you stop a disclosure that has already happened? Even if you get a court order to retract it, how do you recover the loss?
In the event of a breach by the Receiving Party, the Disclosing Party shall be entitled to sue for appropriate remedies, including damages and injunction. Damages for breach of contract by the Receiving Party shall consist of a sum equal to the loss suffered by the Disclosing Party as a consequence of the breach, including loss of business opportunity, costs, damages or actual loss which may be incurred or suffered by the Disclosing Party.
6 Jurisdiction clause
And last but not least, let’s check the jurisdiction clause. This is negotiated quite often, and it is worth it for you to fight for it to be your client’s home jurisdiction. This is what it looks like:
This Agreement shall be governed by and construed in accordance with the laws of India and the courts of [●] shall have exclusive jurisdiction over any disputes between the Parties arising out of or in relation to this Agreement.
I hope you are grasping the nuances. There is so much more to learn if you want to work at a law firm. Are you excited to know how your life will change once you build a successful career in a law firm? In my upcoming email, I will give you an insight into it.