In this article, you will learn:
- How an NDA clause should be structured
- What the consequences of breaching an NDA agreement are
- What steps to take to protect yourself against confidential data leaks
- How long an NDA clause remains in effect
An NDA (Non-Disclosure Agreement) clause is a component of many B2B contracts, which are very popular in the IT industry. However, you need to know how to draft one and what to avoid to prevent facing negative consequences. What is an NDA clause in a B2B contract?
B2B contracts are among the most common types of agreements in the IT industry. Regardless of the scope of duties performed under them, situations often arise where one company requires another company or a specialist performing tasks to maintain confidentiality. This is one of the most important elements of
managing a company’s master data, and failing to include appropriate provisions in the contract puts its operations at risk. To protect their processes and bind the contractor to maintain professional secrecy, B2B contracts often include NDA (Non-Disclosure Agreement) clauses. Its provisions regulate confidentiality issues between two companies and serve to secure sensitive data, such as commercial information or trade secrets. An NDA clause is created similarly to other contract provisions. This means it should include the following elements:
- parties to the agreement,
- definitions specifying the scope of confidential information,
- the duration of the confidentiality obligation,
- restrictions on the use of confidential information,
- obligations of the parties to the agreement,
- permissible exceptions to the confidentiality obligation,
- sanctions for breach of contract.
An NDA clause structured in this way protects the interests of both parties and is the foundation for building trust in business relationships. This does not change the fact that all provisions should be carefully analyzed before signing.
What are the potential consequences of breaching an NDA clause?
The scope of consequences for breaching an NDA clause is primarily determined by the laws governing contract drafting in a given country and the internal provisions of the agreement itself. Sanctions can be applied regardless of the type and scope of the breach, but one must remember to adjust the severity of the penalty to the degree of the offense – different penalties should apply to a person who reveals the operating principle of one element of
RPA for marketers, and others to a person whose negligence led to the collapse of an
autonomous enterprise project. A breach of an NDA clause most often involves legal proceedings – even if the contract provisions specify the exact scope of consequences, one must first prove in court that a breach has occurred. It is worth remembering that in the case of contractual penalties, it is sufficient to prove that the clause provisions were violated. The situation is slightly different when the parties agree that they bear liability under general principles (as specified by the provisions of the Civil Code). In that case, one must not only prove that the clause was breached but also value and prove the extent of the damages. The scope of consequences also determines the approach to breaches, which is worth clarifying in the contract. An example could be the disclosure of a client list containing one hundred items – it depends on the contract definition whether this will be treated as one breach (disclosing the list) or one hundred breaches (disclosing each item separately). When it comes to penalties, financial contractual penalties and damages are most commonly used, but – pursuant to Art. 23 of the Act on Combating Unfair Competition – a breach of an NDA clause can also result in a penalty of restriction of liberty or imprisonment for up to 2 years. One should also not forget about consequences not foreseen in the contract – namely, the loss of trust and damage to reputation.
How to avoid breaching an NDA clause?
The simplest answer to the question above is – just follow the terms of the agreement. This means you need to carefully analyze its provisions, mark confidential information, and define the security methods used. Although avoiding an NDA breach may seem simple, it is worth doing more than just thinking about confidential fragments. First and foremost, it is good to use various methods to restrict access to information covered by the NDA – these can be both physical security measures (e.g., safes or physical keys) and virtual ones, such as granting access only to specific individuals. In addition, if an NDA clause applies to more than one person, it is good to invest in training, preferably with a data protection specialist. When stakeholders (regardless of whether they are employees or clients) know what to avoid, protecting classified information will be easier and more effective. In addition to the methods mentioned, it is also good to regularly monitor access to data covered by NDA clauses. This not only allows you to control who can use it but also allows for the rapid detection of potential breaches.
When does an NDA clause expire?
The duration of an NDA clause should be precisely defined in its provisions – this means it depends on the specifics of the industry, the degree of data confidentiality, and the agreements between the parties. It is worth noting that breaking the provisions of the clause does not mean it ceases to be in effect – despite the breach, the party that committed to maintaining secrecy still has such an obligation regarding undisclosed data. The duration of an NDA clause can be a specific period, e.g., 3 years from the moment of signing the contract, but it can also remain in effect as long as the contract lasts, which means it will expire upon the completion of a specific project or cooperation between the parties. The clause may also cease to be in effect after a specific goal or project stage is reached. An NDA clause may contain provisions allowing for the early termination of confidentiality obligations if both parties agree to it. In case of inaccuracies or doubts, one should always consult a lawyer.
