NDAs Explained – What You Need to Know (part 1)
NDAs ensure that confidential information is used solely for the specified purpose set out between the parties in a business relationship. In the world of business, where ideas, innovations, financial information and secrets are the keys to success, Non-Disclosure Agreements (NDAs) often play an important role in protecting a company’s confidential information. This article will provide a comprehensive overview of NDAs in the context of Business to Business (B2B) dealings.
What is an NDA?
An NDA, also referred to as a Confidentiality Agreement, is a legally binding contract between two or more parties to protect confidential information which may be shared during the course of their business relationship. More specifically, confidential information is non-public information of a company that could harm the company when it would be shared in public. Usually a list of the confidential information is included in the NDA, containing for example: trade secrets, know-how, products and technology-related information, discounts, customer lists, sales and financial information, business plans, etc.
Why and when do we need an NDA?
In the B2B context, NDAs can be an essential tool for protecting proprietary knowledge, trade secrets and other confidential data that is important for a company to maintain its competitive advantages. That sensitive information, therefore, should be defined clearly and carefully in NDAs. However, be careful not to define it too narrow to ensure that you have not missed an important category. By using a properly drafted NDA, your company can secure valuable information from competitors or other third parties who may benefit from the disclosure of such information.
Primary objective
The primary objective of an NDA is to ensure the disclosed sensitive information is securely used and handled, preventing its use or disclosure without proper permission and authorization by the disclosing party. An NDA is often signed at the beginning of a business relationship or before entering into a business relationship.
Example
Common example: a technology company is planning to sell and offer specialized software solutions to an enterprise customer. The companies start by discussing how to integrate the software into the customer’s systems to ascertain the price for the integration and the use of the software. For this, the technology company might share insights about their pricing, SLA, policies and software, and the customer, in turn, might explain their challenges and share business plans. While doing so, the companies therefore plan to share documents including non-public, hence confidential information. This is why it is advised that these companies sign an NDA before sharing this confidential information to each other. Such an NDA can be terminated when the parties sign a final customer contract, which should also include confidentiality terms.
How does an NDA protect your confidential information?’
Like any other legal contracts, an NDA carries important legal consequences for breach of contract. Depending on the severity of a breach, its consequence can range from lawsuits, financial penalties to – in extreme cases – criminal charges. Breaching an NDA can also harm a party’s reputation, which may lead to other long-lasting consequences to its business, especially in business relationships and industries where trust and confidentiality are crucial.
Claims and lawsuits relating to a breach of an NDA are not common, but it absolutely happens that a company needs to pay out a penalty for breach of confidentiality. We have even advised on this matter a few times in the past.
What type of NDA do you need?
There are various types of NDA that can be used based on the specific circumstances and the needs of the parties involved. Below are the three common types of NDA:
- Unilateral NDA (One-sided NDA): In a unilateral NDA, one party, typically the seller, imposes on the other party the obligation to secure the information and not to disclose or use the information for any purpose other than what is specified in the agreement. In a B2B context, unilateral NDAs are often used between buyers and sellers. For instance, a Biotech company (seller), may employ a unilateral NDA to prevent the buyer from disclosing sensitive information they have gained during the purchase of products or services, such as intellectual property and computer technology. Also common in Public Tenders and for RFI (Request for information) in RFP (Request for Price) situations.
- Mutual NDA (Two-sided or Mutual NDA): A mutual NDA involves two parties, and both parties will be sharing sensitive information with each other and agree that both sides will be bound by confidentiality obligations. Mutual NDAs are frequently used when the parties need to exchange considerable amounts of confidential information during their negotiations or business relationship. Such situations can be Joint Ventures, Vendor Contracts or Mergers and Acquisitions.
- Multilateral NDA (Three or More Parties NDA): A multilateral NDA includes three or more parties, where at least one party shares sensitive information with other parties and enforces confidentiality obligations. This type of NDA streamlines the paperwork and administration for the parties in a sense that the parties do not need to enter several unilateral or bilateral NDAs with one another. In a business relationship involving three parties, where all anticipate disclosing confidential information, a single multilateral NDA can replace the need for three different bilateral NDAs between each pair of parties. Such situations can be Partnerships, Government Contracts (like defense and aerospace contracts) and Consortium Agreements.
Contract Negotiations: How To Avoid Negotiation Peaks? Part 5
As we approach the end of Q3, this week a short message as the pressure is on to review, negotiate and close contracts before end of next week!
To make the end of the Quarter more manageable, lay the groundwork:
1. Early Preparaation and Prioritization
2. Communication & Cooperation
3. Standard Templates
4. Implementation of Legal Tech
However, at the end of the Quarter it will always be busier than normal.
𝗙𝗼𝘂𝗿 𝘁𝗶𝗽𝘀 𝗳𝗼𝗿 𝘆𝗼𝘂𝗿 𝗹𝗮𝘀𝘁 𝘄𝗲𝗲𝗸:
* Prioritize: Focus on high volume and strategic deals that are nearing closure and absolutely need to close this month.
Ask yourself: Is the very important contract you are working on now actually closing next week, or should you pause this deal for now and pick it up again in Q4 because it is actually a Q4 deal? Focus on Q3 deals only when busy.
Check: what are the Top priorities of the company & Sales department? Are you working on the right deals?
* Clear Communication:Keep open and transparent communication with your customers and internal teams. Confirm their (timing and process) needs, address any concerns and reiterate the urgency to reach a final agreement.
Streamline the contract process by collaborating closely with internal teams. Set daily meetings where necessary with clear goals for each day.
* Team Collaboration: The management, sales, legal, and procurement colleagues have to collaborate seamlessly to resolve any last-minute hurdles. Cross-functional teamwork is key to overcoming last obstacles or escalation matters
Avoid solo working on your very complicated deal, but collaborate with internal and external teams to ensure maximum efficiency and alignment to avoid delays.
* Deadline Management: Keep a close eye on deadlines, review the full list of contracts to be signed and requirements (contracts, documents, approvals, etc) and plan a few days ahead – leave room for error. Missing a critical date, signature or document in the last week of the quarter can be costly.
Closing deals in the final week of Q3 is all about focus, prioritization, communication and teamwork. Let’s make this week count and finish the quarter with success!
Contract Negotiations: How To Avoid Negotiation Peaks? Part 4
In the run up to Quarter 3 end (30th of Sept.), I advise you to send an email out today to your Sales, Partner & Procurement colleagues informing them that in the next two weeks, you will only pick up contracts that are:
* already ongoing;
* truly urgent; and
* need to be signed before the end of this month / end of Quarter (3).
Any deviations from this rule should get a green light from Senior Management.
Why?
The above is a pro-active step to manage your workload and working towards an efficient Legal department.
By emphasizing urgency and advanced planning, you can alleviate the end-of-quarter rush, enabling Legal to focus on what genuinely demands attention.
From experience I am aware that it is not an easy sell to the organisation, but , but trust the process. Once the wider organization realizes this is the gold standard for the legal team, they will (most of the time):
(i) initiate timely discussions, and
(ii) forward their inquiries and feedback well in advance.
I have deployed this strategy previously and while it takes a while for teams to get used to, the positive change is undeniable after 2-3 Quarters.
It ensures that your team’s time and resources are directed toward the most critical and time-sensitive matters. This approach also prevents (to the extent possible) that the teams are working on less urgent tasks, allowing for better productivity and focus.
Next Steps before you hit send:
1. Inform the sales, procurement, partnerships teams during your regular sync-up meetings about this communication and approach of the Legal department.
2. Align this approach with your manager and stakeholders or C-suite overseeing the sales, procurement, partnerships teams.
Good luck! Let me know if it also worked for you or if you have questions / comments.
Contract Negotiations: How To Avoid Negotiation Peaks? Part 3
𝗩𝗲𝗻𝗱𝗼𝗿 𝗖𝗼𝗻𝘁𝗿𝗮𝗰𝘁𝘀
Picture the moment of buying new software, finalizing the lease on that dream workspace or formalizing your agreement with the new accountant via engagement letters. These are not just signatures or digital approvals of external contractual terms, they are important business decisions. Welcome to the world of vendor contracts!
Building on our previous discussion how to negotiate your 𝘰𝘸𝘯 𝘤𝘰𝘯𝘵𝘳𝘢𝘤𝘵𝘴 like customer contracts (Part 2), let’s focus now on contract of other parties.
𝗦𝘁𝗮𝗿𝘁𝗶𝗻𝗴 𝗽𝗼𝗶𝗻𝘁
One key principle we always advocate for: be cautious and hesitant to approve external template vendor contracts (referred to as Customer Paper) replacing your own template customer contract. Even though it is advised that large companies have their own template vendor contract for their vendors, only approve the use of such templates in exceptional and pre-approved cases. This will not only prevent delays, protect your business interests but also streamlines the negotiation process.
𝗠𝗮𝗶𝗻 𝗶𝗻𝘃𝗼𝗹𝘃𝗲𝗱 𝘁𝗲𝗮𝗺𝘀
𝟭. 𝗠𝗮𝗻𝗮𝗴𝗲𝗺𝗲𝗻𝘁:
Roles:
· Strategic direction
· Alignment other teams. ´If the Sales Team wants to buy this software tool, let’s involve Procurement, Finance and IT to check the suitability of the tool´.
· Final decision
* Best practice:
– Keep overview of vendors to align with company’s objectives.
– Work on communication between teams, especially for large vendor contracts.
𝟮. 𝗣𝗿𝗼𝗰𝘂𝗿𝗲𝗺𝗲𝗻𝘁: Acting as the bridge between your company and the external vendors, having the overview and responsibility for all vendor contracts.
Roles:
· Budget & Pricing; Assess value and benefits of vendor contracts.
· Relationship building and primary vendor point of contact
· Negotiating contracts.
· Contract compliance with company policies/procedures
* Best practice:
– Inform all teams early of anticipated engagements with vendors.
– Keep the management updated with vendor list
– Involve the legal team 𝗲𝗮𝗿𝗹𝘆 (avoid end of quarter requests) to review contracts with clear timelines.
𝟯. 𝗟𝗲𝗴𝗮𝗹.
Roles:
· Review, advice and negotiate contracts
· Streamline process
· For large companies: create vendor templates
· Create questionnaire for all vendors (create with Compliance / Data Security Team)
* Best practice:
– Create a vendor questionnaire
– Stay proactive (not reactive) to avoid review of vendor contracts in peak periods
– Improve communication between legal, procurement and other teams to avoid delays and last minute reviews.
Prioritize vendor contracts for Quarter start periods. handling contracts based on $value and potential impact.
How To Avoid Peaks in Negotiation Cycles by Improving Team Collaboration
1. Introduction
Working towards an optimized negotiation process is not only a legal matter but requires effective collaboration between various teams. In my experience, the teams highlighted below have the most important role in negotiation cycles.
The general rule to involve all teams in your contract template creation and contract negotiations will always apply. As Legal is in the middle of these processes, we have written this series from the point of view of the Legal department.
Let’s dig deeper into the roles of the different teams involved in negotiating your own contracts.
2. 𝗠𝗮𝗻𝗮𝗴𝗲𝗺𝗲𝗻𝘁
Next to a focus on the strategic vision of the company, the management will encourage teams to sign as many customer contracts as possible. It will especially crucial for the management to have a seamless process with minimal involvement from management, except where agreed.
Main roles
In contract negotiation, the roles of the company’s management will be:
- · Strategic Vision
- · Risk Management
- · Stakeholder Alignment
- · Escalations / final decisions
Best practice: Establish a robust structure that defines Management’s role and involvement in decision-making processes. Explore and discuss refinement of contract processes and agree on key priorities.
3. Commercial Team
With this we mean for example Sales & Account Managers, Business Development Managers, Partnership Teams. As a sprinter nearing the finish line, the Commercial Team will race to close deals at the end of each quarter. Smoother processes will mean better results so Commercial Teams are usually more than willing to work towards improvements.
Main Roles:
In contract negotiation, the roles of the company’s commercial team will be:
- · Overall Overview and Responsibility for customer contracts
- · Relationship building / primary point of contact
- · Getting the deal done
- · Stakeholder Alignment
Early involvement and cooperation with other teams is imperative for Sales to avoid bottlenecks & peaks. In the cooperation with Legal, focus on (i) Setting Priorities, (ii) Contract Template Training and (iii) when & how to involve Legal.
4. 𝗟𝗲𝗴𝗮𝗹
In contract negotiations, the legal team navigates all legal advice and negotiations from a strategic point of view, with a goal to improve processes and reduce risks for the company.
Main roles:
In contract negotiation, the roles of the company’s legal team will be:
- · Contract Advice, Negotiation and Drafting
- · Risk Management of the company
- · Creation of contract templates / playbooks and contract process improvement
Best practice: Legal shines in drafting, advising and negotiation of contracts. Do not create gridlocks by making them the point person for each negotiation. Strategize with Sales when Legal should step in, which should mainly be for large or strategic customer contracts.
Conclusion
By carefully dividing roles and collaborating closely between teams, we are able to work on improving contract & negotiation processes. This also includes working better together to avoid end-of-quarter spikes before the holidays.
In our other articles about this topic, see 1, 2, 3 and 4 we dive deeper on the ways to improve the communication and collaboration between these teams.
Contract Negotiatons: How to Avoid Negotiation Peaks? Part 1
Negotiating commercial contracts is always a daunting task, but is particularly complicated at the end of Quarter. We have written a series of tips on how to avoid these negotiation peaks, using my experience gained on this topic since 2004, as I have found that now a great time to start preparing for the end of Q3 and especially for the highest peak of the year (end of Q4).
If we all embrace the goal of reaching a steady negotiation rhythm, we are able to unlock benefits like improved decision making, streamlined processes, more joy at work and stronger relationships. Replace rushed contract negotiations & discussions with a strategic plan that allows for efficient and optimal contract negotiations.
As Commercial Contracting Experts, we focus on the following two scenario’s:
Scenario 1: negotiating your own contracts with buyers of your Products & Services: Customer Contracts.
-Teams involved: Sales, Account Management, Legal, Finance, Management, etc.
Scenario 1: negotiating contract of other companies to buy their products: Vendor & Supplier Contracts.
-Teams involved: Procurement, Finance, Facility, IT, Legal, Management, etc.
Top 10 common Commercial Contracts
– Confidentiality Agreement (NDA)
– Order Form
– Master Services Agreement (MSA)
– General Terms & Conditions (GT&C)
– License Agreement
– Framework Agreement
– Partner Agreement (Reseller, Distribution, Incentive Agreement)
– Service Level Agreements (SLA)
– Statement of Work (SOW)
– Data Privacy Agreement (DPA)
First Tip: start your preparation & planning and list your priorities now.
Are the teams your work with aware that the contracts you are working on need to be signed soon – particulary before end of Q3 or Q4??
Contact your team members this week to inform them of any upcoming contract negotiations.
Four Critical Factors: The following four Critical Factors will prepare you to work towards a steady negotiation cycle:
1. Early Preparation, Planning and Prioritization
2. Communication & Cooperation
3. Standard Templates & Procedures.
4. Implement Legal Tech & Digital Solutions
Bonus: specific actions for the last weeks of each quarter.
In the next posts in this series we will provide you with the specifics of the four Critical Factors and share practical tips for the teams involved, especially Legal, Sales, Procurement and Management.
Canadian Court Recognizes👍as a Contract Agreement
As far as we are aware, a Canadian Court has made a first of its kind ruling relating to the acceptance of an emoji as a contract agreement. This is an interesting judgment to illustrate the developments relating to the acceptance of digital ways to approve contracts. It is a great simple ruling explaining how accepting offers digitally can be seen as a valid contract.
What was the court ruling about?
Parties were involved in court because one party (the seller) claimed that the other party (the Buyer) said yes to an agreement. The Buyer did not say ” yes” or ” I agree” and did not sign any contract, but did send a 👍 Emoji to the Seller. The question in court was whether the sending of this emoji can be treated as an agreement. Is this a valid contract?
Even though no contract was signed, the question was if the emoji could be seen as a ” signature” or a ” yes” to the proposed contract. A very unusual request, but on the other hand also a very normal question as the Seller did act on the Emoji as understood it as being a ” Yes”.
In contract negotiations, please agree on the ways the contract will be signed to avoid these issues.
What was the verdict?
The Canadian Court Ruled that a 👍 Emoji Counts as a Contract Agreement. For details, please see https://lnkd.in/gyBrSAdn
The judge stated, amongst others, the following: “This court readily acknowledges that a 👍 emoji is a non-traditional means to ‘sign’ a document but nevertheless under these circumstances this was a valid way to convey the two purposes of a ‘signature’,” he wrote.
Correct decision?
What seems like an unusual verdict, actually makes a lot of sense looking at the facts in this specific case. After talking to each other on the phone, Kent (the Buyer) sends a copy of a contract as an offer to deliver the goods to him via text to Chris. Chris responds with a thumbs up.
Without knowing the full background, this indeed looks like an agreement to enter into a contract (and agreeing to the contents of the contract). At least under Dutch law, depending on the circumstances of the case, this could reasonably be seen as entering into an agreement.
Trend for the future
This is in line with other verdicts in the past years. Valid contracts are formed all the time in digital form. It can be seen as a binding contract if an offer and acceptance are sent in digital form by e-mail, SMS, WhatsApp and other tech solutions like DocuSign etc. It is an important realization for everyone that the digital world is evolving and we need to adapt!
Lesson Learned
Next time you respond with (for example) 🚀 ✅ ✔️👍🏾🙏🏼 to a question or request to agree to an offer, be very mindful of your intentions.