INTRODUCTION
In every professional or commercial relationship, parties inevitably share information to achieve a common objective. In today’s business environment, that information may include trade secrets, financial records, product formulas, operational processes, client databases, software systems, or strategic plans.
While such disclosure is often necessary, the party sharing the information reasonably expects that it will be kept confidential, used only for the agreed purpose, and not disclosed to third parties without consent. The principal legal tool for protecting this expectation is a Non-Disclosure Agreement (NDA).
This article explains, in clear terms, what NDAs are, when they are needed, the obligations they create, key drafting considerations, and the remedies available under Ghanaian law if an NDA is breached.
WHAT IS A NON-DISCLOSURE AGREEMENT (NDA)?
A Non-Disclosure Agreement, also known as a Confidentiality Agreement, is a legally binding contract or clause in a contract that governs or regulates the disclosure, use and protection of confidential information.
The Party that owns and discloses the confidential information is referred to as The Disclosing Party while the Party to whom the confidential information is disclosed is known as The Receiving Party.
TYPES OF NDAs
There are three types of NDAs:
- Unilateral NDA.
Under this type of NDA, only one party discloses confidential information. This is common in employment relationships and consultancy engagements.
- Mutual (Bilateral) NDA.
Both parties exchange confidential information. It is common in mergers and acquisitions, joint ventures, or partnerships.
- Multilateral NDA.
Under this type, three or more parties share confidential information among themselves. It is often used in complex transactions or consortium arrangements.
UNDER WHAT CIRCUMSTANCE IS AN NDA NEEDED?
NDAs are especially important in:
- Employment relationships, where staff access sensitive internal data of the employer.
- Business negotiations, including mergers, acquisitions, partnerships, investments among others.
- Third-party service engagements, such as consultants, IT vendors, auditors, or professional advisers who can access systems, records, or client information.
In practice, any situation involving valuable non-public information should prompt the consideration of an NDA.
SCOPE OF A NON-DISCLOSURE AGREEMENT
Confidential information protected under NDA may include:
- Proprietary business information;
- Trade secrets and product formulas;
- Financial and accounting data or records;
- Operational manuals, systems and internal processes;
- Product designs or service delivery models;
- Customer or supplier databases.
However, NDAs generally do not cover:
- Information already in the public domain;
- Knowledge independently developed by the receiving party;
- Information lawfully obtained from third-parties;
- Disclosures required by law
CORE OBLIGATIONS UNDER AN NDA
An effective NDA typically imposes three key duties or obligations on the receiving party:
- Duty of Confidentiality
The receiving party is under the obligation to safeguard the information using reasonable security measures and to treat it as strictly confidential at all times.
- Duty not to Misuse Information
The receiving party is under the obligation to use the confidential information solely for the purpose agreed upon and not for any personal benefit or to compete with the disclosing party.
- Duty not to Disclose to Third parties.
The receiving party is under a duty not to disclose the confidential information to any third party without the prior consent of the disclosing party, unless such disclosure is required by law.
KEY CONSIDERATIONS IN A NON-DISCLOSURE AGREEMENT.
- Scope of Confidential Information.
The NDA should define confidential information broadly enough to cover all categories of information disclosed, including technical, commercial, and financial data. At the same time, it should clarify what is not covered under the NDA, such as publicly available information or knowledge already known to the receiving party.
- Confidentiality Obligations.
The agreement must clearly state the obligations of the receiving party, including maintaining the confidentiality of the information, implementing appropriate security measures, and restricting access to authorized personnel only.
- Permitted Use and Disclosure.
The NDA should specify the circumstances under which the receiving party may use the confidential information and the purpose for which it may be used. Any disclosure outside these boundaries should be prohibited unless expressly authorized by the disclosing party.
- Consequence of Breach.
The agreement should set out remedies for breach, including the right to claim damages, seek injunctive relief, or enforce other contractual sanctions agreed between the parties.
REMEDIES FOR BREACH UNDER THE LAWS OF GHANA
Where an NDA is breached, the court may order,
- Injunction to prevent the receiving party from further disclosing the confidential information;
- Damages to compensate the disclosing party for losses they may have suffered; and
- Other appropriate relief as the circumstance of the case may require.
ILLUSTRATIVE COURT DECISION
The case of Ewurabena Sackey & Another v United Bank for Africa (2016) JELR 107469 (HC) concerned the unlawful disclosure of customers’ banking details. The court in this case found the bank liable for negligent handling of confidential information and awarded damages as well as an injunction to prevent any further disclosure.
CONCLUSION
Properly drafted NDAs are powerful legal tools that protect confidential information, reduce the risk of information misuse and provide enforceable remedies in the event of a breach. Safeguarding confidential information through NDAs should therefore be an essential and proactive part of every transactional relationship.
By: Rachel Banitsi
