A Preferencial NDA Clause

I recently had to look over several contracts, each which was for the same purpose, but all three were quite different. One was 2 pages, another 9, and the third 18. All three, however, contained the same basic elements – who the contract was between, what the purpose of the contract was, and several clauses outlining various limitations of the agreement.

In all three there was what I call the Non-Disclosure Clause. The purpose of this clause is to prevent someone from gaining information through the agreement and then using it for their own purposes. For example, a bakery might hire a baker, but doesn’t want their new hire to be able to use their recipes except while working for them.

Naturally, this clause does not have a fully standardized phrasing, since it is highly dependent on the nature of the agreement, and the type of information that might be expected to be exposed through the arrangement. As a result, I was not surprised to see that all three had completely different phrasing for this clause. (To bring this point out, the clause regarding Governing Law was almost identical in all three contracts.)

One of the three, however, I found to be much better written than the other two, and not from a legal perspective, but from the perspective of someone who might sign the document. The reason I liked it so much (although it was not the most open, or the most closed of the three versions) was because it was reciprocal.

In almost any relationship between two businesses or individuals, information will be shared in both directions. As such, while one party is “issuing” the contract to the other (remember that contracts are unilaterally binding when signed by both parties), many of the issues at hand apply to both parties.

As an example, take an employment contract. There is likely a phrase regarding non-disclosure, or confidential information, and it might be written stating that the employee cannot use any confidential information they acquire through working for the employer for any use other than the benefit of the employer. That’s fine, but the employee will also be giving the employer some information, for example, their Social Insurance Number or Social Security Number.

As an employee, you want to be sure that the employer will not hand out that information, and they will treat it with the same respect they expect of you when dealing with their information. What better way to ensure this than to have a reciprocal agreement when it comes to the handling of confidential information?

After seeing the clause phrased this way, not mentioning who is giving and who is receiving the information, but making the clause binding on the receiver of the information, I recommended that an adaptation of that clause be used. If both sides of the contract are willing to bind themselves by the same clause when it comes to confidential information, the level of trust between parties (not necessarily from a legal perspective though) is likely to increase.

As a note, I am not a lawyer, nor an expert in law by any definition of the word. This article is about my impressions of a particular clause – it is not intended to provide legal advice. If you have a question regarding a specific case, please refer to a lawyer who can provide advice relevant to your situation.