Solihull: 0121 705 7571
Dorridge: 01564 779393

Creating an Effective Non-Disclosure Agreement (NDA): protecting your business

July 6, 2023

Protecting confidential information and trade secrets is important for any business. Parties exchange confidential information as part of a regular practice when entering or just considering entering a vast variety of transactions.

It is vital important to protect confidential information while doing business. And in the first place such information should be defined as confidential.

The disclosing party generally wants to ensure that the definition of confidential information is enough to cover all information that it may disclose, but it shouldn’t be an overly wide definition because it may be unenforceable.

There is a three-stage test in UK law to define whether the information can be determined as confidential:

  • the information in question must have the “necessary quality of confidence”(*);
  • a recipient of confidential information should know, or should realise from the circumstances, that the information provided to them is confidential, and they are required to keep it secret;
  • the confidential information must be used or disclosed (either threatened or actually) in an unauthorised manner and thereby cause harm to the owner.

The best way of ensuring that information is disclosed in circumstances importing an obligation of confidence is through a written contract such as non-disclosure agreement (or NDA). This can and should be done at the beginning of a relationship while a potential project or business is being considered and throughout the negotiation of any resulting commercial contract, remains confidential and not used other than for the purpose for which it is disclosed.

The agreement should clearly limit the use of the confidential information to a business purpose to avoid obtaining other commercial advantage by the recipient.

The first thing is to define what information constitutes confidential and it may be for example operating procedures, policies and practices, secure codes and algorithms, trade secrets, product formulae and recipes, research and development projects, financial information and business plans, customer, supplier, and employee information.

The form of NDA may vary, but usually confidentiality agreements typically contain the following provisions: the definition of confidential information and exclusions from it, nondisclosure obligations, permitted use of confidential information, return or destruction of confidential information, duration of the agreement, remedies for breach, intellectual property right, accuracy of information and non-solicitation provisions.

If you are thinking of entering into any negotiation about potential commercial project or other commercial relationship and need to protect your important business information by preparing the confidential agreement, please do not hesitate to contact us on 0121 7057571 or email to  

(*) see Saltman Engineering Co Ltd v Campbell Engineering Co Ltd [1948] 65 RPC 203 and Coco v AN Clark (Engineers) Ltd [1969] RPC 41

Kateryna Knyazyeva
Paralegal – Commercial Department

This article is for general information purposes only. It does not constitute technical, financial, legal advice or any other type of professional advice and is no substitute for specific advice based on your individual circumstances. We do not accept responsibility or liability for any actions taken based on the information in this article. For more information, please click here.