A Non-Disclosure Agreement (NDA), also called a Confidentiality Agreement, is a contract under which one or both parties agree to keep specified information confidential and to use it only for the agreed purpose. NDAs are used across virtually every commercial context: technology partnerships, employment, vendor relationships, M&A due diligence, fundraising, and any situation where sensitive business information must be shared before a formal agreement is in place. Related internal resource: "employment agreement vs consultant agreement" (/resources/employment-agreement-vs-consultant-agreement)
What Must Be Defined As "Confidential Information"
The definition of confidential information is the heart of the NDA. If the definition is too narrow, important information falls outside the agreement's protection. If it is too broad, every casual email exchange between the parties becomes potentially confidential - which is unworkable.
A Workable Definition:
All information disclosed by either party to the other in connection with [the Purpose], whether in writing, orally, electronically, or by any other means, that is: - Marked or identified as "Confidential" or "Proprietary" at the time of disclosure, or - Disclosed orally and identified as confidential at the time of disclosure and confirmed in writing within 5 business days, or - Of a nature that a reasonable person in the industry would understand to be confidential, including but not limited to: trade secrets, business plans, financial information, customer and supplier lists, product roadmaps, source code, technical specifications, pricing information, and marketing strategies.
The Permitted Purpose Clause
An NDA should always state specifically why the information is being shared - the "permitted purpose." This limits how the receiving party can use the information. EXAMPLE: "The Confidential Information may be used by the Receiving Party solely for the purpose of evaluating a potential commercial partnership between the parties for the development of [X product] ('Permitted Purpose'). The Receiving Party shall not use the Confidential Information for any other purpose, including for the development of competing products, without the prior written consent of the Disclosing Party." Without a permitted purpose clause, the receiving party might argue they are entitled to use the information for any purpose that is not specifically prohibited.
Standard Exclusions From Confidentiality
Every NDA must contain exclusions - information that is not covered by the confidentiality obligation even if it would otherwise fall within the definition: Information already in the public domain at the time of disclosure (not through breach of the NDA) Information that becomes public through no fault of the receiving party after disclosure Information the receiving party can demonstrate they already possessed before disclosure (with documentary evidence) Information independently developed by the receiving party without reference to the confidential information Information received from a third party who had the right to disclose it without restriction COMPELLED DISCLOSURE: What happens when a court or regulator requires disclosure of confidential information? The NDA should permit such disclosure - but require the receiving party to: (a) give the disclosing party prompt notice so they can seek a protective order, (b) disclose only what is strictly required, and (c) cooperate with any reasonable effort by the disclosing party to limit the disclosure.
Beyond Not Disclosing The Information, The Receiving Party Must:
Use the confidential information only for the Permitted Purpose Not copy, reproduce, or extract the information beyond what is necessary for the Permitted Purpose Limit disclosure within their own organisation to employees who have a need to know and who are bound by equivalent confidentiality obligations Take at least the same measures to protect the disclosing party's confidential information as they take to protect their own confidential information of similar nature and value (but not less than reasonable care)
How Long Does The Confidentiality Obligation Last? Two Distinct Durations To Specify:
Term of the NDA: The period during which disclosure can occur. Typically 1-3 years. Duration of the confidentiality obligation: How long after disclosure (or after the NDA expires) must the information be kept confidential? Options: Fixed period: 2-5 years from disclosure is common for commercial NDAs Perpetual confidentiality for trade secrets: Genuinely secret information (formulas, proprietary processes) that remains secret can be protected indefinitely For most commercial information, 2-5 years post-disclosure is reasonable. Perpetual obligations for all information are unusual and may not be enforceable for information that has ceased to be genuinely confidential. SECTION 27 AND NON-COMPETE ELEMENTS IN NDAs Section 27 of the Indian Contract Act 1872 provides that any agreement that restrains a person from carrying on a lawful profession, trade, or business is void to that extent. NDAs sometimes include broad non-compete provisions disguised as confidentiality - for example, "the receiving party shall not use the information to develop any competing product."
Indian Courts Distinguish:
Legitimate confidentiality protection: Not sharing the information -> valid Restraint of trade: Not working in a competing field or using independently developed knowledge -> void under Section 27 if overly broad An NDA cannot prevent a person from using their own knowledge, skills, or experience - only from using the specifically disclosed confidential information.
Remedies For Breach: Why Injunctions Matter
The primary remedy for breach of an NDA is an injunction - a court order stopping the disclosure or use of confidential information. Once confidential information is disclosed, it cannot be "un-disclosed." Damages are often inadequate.
When to obtain a review
A review is especially useful when…
- — You are about to sign, send, rely on or respond to this document.
- — The draft was copied from an old template or another state.
- — There is money, property, business control, statutory deadline or reputation risk involved.
- — You need Surat/Gujarat-specific drafting, review or negotiation support.
Legal information notice
This article is general legal information for India and Gujarat. It is not a substitute for advice on your specific facts, documents, limitation period, stamp duty position or court strategy.