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SIGNIFICANCE OF NON DISCLOSURE AGREEMENTS

SIGNIFICANCE OF NON DISCLOSURE AGREEMENTS

In today’s world, the main aim of a start-up is to efficaciously implement their unique business idea. There is a lot on a platter when it comes to completion of financing, registering and kick starting a start-up, whose legalities can’t be ignored. With respect to the legal view, when an idea is characterized as unique as well as innovative, it turns out to be a valuable asset for the start-up. In case of the start-ups involving any kind of technology, these two factors are known to reward the business in financial terms. The uniqueness and innovation are thus regarded as intellectual properties of the business, in legal terms. In order to streamline an income and on the same hand, to create a legal hedge, one must make sure that these intellectual properties have been commercialized properly. A disclosure of the business idea is possible at various stages during the operating of the business, such as in case of negotiation rounds or when a discussion is done with the financiers, employees, suppliers or when one deals with potential business partners. The competitive advantage that the firm have due to these business ideas may be reduced, owing to this unprotected disclosure. It even has an illeffect on the future standing of the company. Thus in order to protect the uniqueness of the business ideas, the startup owners shall understand the importance of drawing the non disclosure agreement prior to divulging the idea to other stakeholders of the business.

Other name of Non Disclosure agreement is the confidentiality agreement. It is defined as a legal document that is binding on the parties which makes the information they share to be confidential, i.e. the disclosure to the third party is set off. The NDA has a wider scope as it does not only covers the intellectual properties but also any type of information that parties want to keep confidential.

The focal point of the NDA is to prevent the disclosure of information from the hands of the disclosing party, i.e. the party to whom the information has been provided and to create a mechanism whereby the information can be used under specific conditions and for specific purpose.

NDA can be of two type, one-sided or mutual. In case of one sided agreement, only one party discloses information, while in case of mutual agreement, all parties disclose information. As NDA is a contract between the parties, it shall be inclusive of all the elements of the valid contract such as there shall be an agreement on the offer against some consideration by the legal parties. Thus, it is subjected to UAE contract law. However, the creation of NDA is often associated with problem of enforceeability, which are as follows:

In most cases, various stakeholders often enter NDAs which does not specify a particular set of information that is to be kept confidential, rather it covers all sort of information which lacks proper taxonomy. It is believed that there is uncertainty as to whether or not they will be enforced in courts of UAE or not, which leaves the part to take a recourse to arbitration proceedings.
The elements that the NDA shall be inclusive of, are following:

1. The information that is to be kept confidential shall be properly mentioned and defined. The UAE law provides certain sets of information that are termed as “ non confidential” with respect to the general principles of law. A claim can be raised on such breach.
2. The receiving or the disclosing party should be properly informed about their rights and duties
3. There shall be a specific duration of NDA, that means the receiving party has to keep that information confidential for such period.
4. The NDA shall also include a territorial limit on the basis of authorized disclosure and on the nature of business.
5. Lastly, a jurisdiction clause shall be present in NDA and whether or not the parties can consider opting for arbitration or not.

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