Reciprocal Non-disclosure Agreements

Leezer Kaur
Mar 2, 2023
3 min read

“Written by Leezer Kaur, a 3rd-year B.A.LL.B. student at Army Institute of Law, Mohali.”

Agreement

This term is defined under Section 2(e) of the Indian Contract Act, 1872, as a promise for some valid consideration.

Non-disclosure Agreement

These are the agreements where some sensitive information is shared by a party to another party which is supposed to be kept confidential by it. There are two parties in a non-disclosure agreement, i.e., the receiving party (that receives the confidential information) and the disclosing party (the one that shares the confidential information). However, in the case of a reciprocal non-disclosure, both parties mutually act as the disclosing and receiving parties. These are also abbreviated as NDA.

There are three types of non-disclosure agreements.

Unilateral: Where one party shares some confidential information with one other party.
Bilateral: Where both parties share confidential information and expect it not to be shared with a third party.
Multilateral: Where one person simultaneously shares a set of information with two or more parties.

Some examples include:

Between the doctor and his patient
Between the employee and his employer
Between the counsel and his client

Reciprocal Non-disclosure Agreement:

It is also a kind of nondisclosure agreement that is formed between two parties when both parties mutually agree, whereby they ensure that the confidential information shared by each party will not be shared anywhere else and will be used just for the business purpose for it was taken. Also, the receiving party is responsible for the protection of the data disclosed to it, and the other party may even ask to get back the documents, statistics, etc., provided to it as confidential information when the task for it was provided is accomplished. It may be made on its own by the parties or with the help of an attorney.

Confidential Information:

It may be understood as any non-public or sensitive information which is not supposed to be shared by the receiving party to any third party and is to be used just for the purpose for which it was shared to it.

The five pillars of a reciprocal non-disclosure agreement are:

Name of both the parties that are agreeing to non-disclosure of sensitive information.
Purpose of the agreement, i.e., regarding the confidential information which is not to be shared by each party. The purpose for which such information is shared is to be mentioned in the agreement. It may also provide for any information which is excluded from the purview of confidentiality.
Duties of both parties to the agreement. It must specify the data and information which is to be kept confidential by the other party and the duty of the other party to protect it.
Duration for which the agreement shall be binding on both parties. The agreement shall be binding for a specific period or for an infinite period as well.
Punishment for violation of the provisions of the agreement. Generally, on breach of confidentiality, the injunction is issued or compensation for damages is provided for the other party, but the parties may by themselves decide the punishment for breach.

Legal Requirements:

It must be legal and valid as per the law. It must not be against any of the statutory provisions or laws of the land.
The state laws may provide for additional guidelines to be complied with for the enforcement of the agreement, so these are to be complied with before making the agreement enforceable.
Both parties must sign the agreement.
There is no need to have a witness or signatures of a third party to make it enforceable.

Benefits:

It is entered into when both parties mutually disclose some sensitive information to each other for a common purpose, and neither of them wants it to be disclosed by the other party to protect their formulas, secrets, designs, development process, etc., from being shared to the public, they enter into reciprocal non-disclosure agreements. It can be entered by one company with the other company or even with a private individual or between two private individuals as well to protect their business strategies, ideas, formulas, etc.

Conclusion:

Reciprocal non-disclosure agreements are a kind of mutual agreement where both parties are responsible for the non-disclosure of some confidential information.

References

'Reciprocal non-disclosure agreements and confidentiality agreements', available at: https://uncw.edu/datascience/documents/sample%20nda%202018.pdf.