CONFIDENTIALITY AGREEMENTS (NDA)

At the same time, in their day-to-day activities and in their dealings with counterparties, traders inevitably provide information, some of which may be trade secret. In order to ensure the protection of confidential information, parties resort to so-called confidentiality agreements, better known in the Anglo-Saxon legal system as non-disclosure agreements (NDAs). With the increasing dynamics of international trade and the entry of foreign companies and business practices, such confidentiality agreements are becoming more and more common in Bulgaria. This article aims to shed light on these agreements, their scope and how they can be used to protect your confidential information.

A confidentiality agreement is a contract by which traders and individuals between whom a relationship has arisen (whether in connection with negotiations or the conclusion of commercial contracts, employment contracts, consultancy services, etc.) regulate the rights and obligations of the party providing the information (the "providing party") and the party receiving the information (the "receiving party").

In addition to being concluded as a separate contract, the confidentiality agreement may also form part of the main contract and contain the clauses governing this relationship. In certain types of relationship (exploration of companies for investment purposes, for example), the conclusion of a confidentiality agreement may precede the conclusion of the main contract. It is also possible to conclude the agreement on the occasion of the termination of the main contract, in order to ensure that the parties' business secrets are preserved and that circumstances relating to the operation of the contract and its termination are not disclosed which may damage the reputation of the traders.

The agreement may be bilateral or unilateral - where confidentiality obligations may only arise for one of the parties. This is common where essentially one party discloses confidential information in the course of the underlying relationship and the other benefits from an obligation not to disclose it.

In practice, there are customary requirements as to the content of agreements and the individual clauses that are governed. Generally, the content of confidentiality agreements includes:

Definition of confidential information one of the most important requirements for the information that is confidential to each party. Depending on the nature of the relationship between the parties, this information may range from information about products, production organisation and technology, business strategies, information about suppliers or customers, about specific issues relating to the relationship between the two companies, etc.

Obligations of the parties - the exact obligations of the party receiving the confidential information can be described, namely what it can be used for, how it can be stored, who can have access to it, etc.

Exceptions it is important to provide in the agreement for situations in which disclosure of the confidential information will not constitute a breach, as there are cases where such disclosure may be lawful and even necessary for the receiving party. An example in this respect are the obligations to disclose confidential information to public authorities, courts, etc. Of course, if the discloser has already made the information publicly available, the disclosure will also not be an infringement. Agreements most often also allow confidential information to be disclosed to the parties' advisers (lawyers, accountants, auditors, etc.), with corresponding confidentiality obligations and liability of the receiving party for their actions.

Term the parties should agree on the term during which the agreement remains in effect and the parties may not disclose the confidential information. The term is to be determined by the parties and may be for a fixed number of years or may be open-ended.

The consequences of an infringement in principle, each party is entitled to claim any damages that it has suffered as a result of the disclosure of the confidential information. However, in order to relieve a party of the burden of proving such damages, it is permissible to provide for liquidated damages as long as they do not go beyond their inherent injunctive, compensatory and punitive functions.

In conclusion, the importance of confidentiality agreements in protecting the trade secrets of businesses should be emphasised once again. However, these agreements should be carefully drafted to ensure that the parties are confident that their interests can be protected and that the agreement is not drafted in a way that creates real obstacles to the performance of the obligations under the underlying legal relationship. For this reason, if you wish to draw up such an agreement to protect your trade secrets or your counterparty wishes to enter into such an agreement, we recommend that you contact a lawyer who can suggest the optimal solutions for its conclusion.

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