Article XIV- Legal Awareness of Contractual Documentation required for Business Enterprise Expansion and Growth

 

Non-Disclosure Agreement (NDA) -Myths & Concerns

During our interactions with new Entrepreneurs, we have many times come across situations where the Entrepreneurs enter into and continue to do business transactions with their customers merely on the basis of a Non-Disclosure Agreement executed between the parties with a firm belief and myth that there is an NDA and so there is no need to execute any other document for carrying out business transactions.

The notion that an NDA is sufficient to cover all business transactions and protect an entrepreneur from any known as well as unknown exposure is the biggest myth and concern that new Entrepreneurs never realize despite our repeated warnings.

One needs to understand that the NDA is a document that just protects confidential/proprietary information of the parties to the business transaction and NOTHING MORE. Other than the above an NDA does not in any way protect either party from any business / financial risk or exposure related to the business transactions. The Entrepreneur needs to enter into a separate Agreement to cover all other legal/commercial risks and liabilities.

Another major trend is to execute an “Unliteral Non-Disclosure Agreement” which protects the confidential information of the corporate with whom a vendor/entrepreneur enters into a business relationship AND then accepting onerous obligations for protecting the vendor organization’s /entrepreneur’s Confidential Information without even understanding the implications of various provisions of such a one-sided document. In this way, an entrepreneur/vendor organization then enters into a vicious never-ending legal obligations trap.   

The most important concern here is the contents/provisions of the Non-Disclosure Agreement document accepted/ executed. The details regarding the type of information covered period and the terms and exclusions of an NDA need to be evaluated before executing the document. We have noticed that many times NDAs are blindly accepted/executed without understanding these contents/provisions and their implications.

To sum up we must remember that Non-Disclosure Agreement (NDA) is not just a mere “formality” to start a business relationship BUT SHOULD be treated as and given equal importance to as any other legal document in a business transaction with a prospective customer and hence needs a proper Legal review /approval before being executed. 


For any query feel free to contact me.


Mahesh Vaidya
M.Com, LLM, ACS, DFM, CAIIB  
Legal Adviser
Cell Number 9769949701 / 9223173695
Email ID maheshvaidya2706@gmail.com

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