Non-disclosure agreement (NDA) — what to include and enforce

A non-disclosure agreement (NDA in business shorthand) binds the party receiving information not to disclose it or use it outside the agreed purpose. In Polish law it is not a nominate contract — the parties shape its content freely, and protection is reinforced by the provisions on trade secrets and liquidated damages. A well-drafted NDA is also evidence that the firm takes care of confidentiality, which matters in any potential dispute.

Why sign an NDA if the Act already exists

The Act on Combating Unfair Competition protects trade secrets, i.e. technical, technological, organisational or other information of economic value which is not generally known or easily accessible. There is one but crucial condition: the entitled party must with due diligence take steps to keep it confidential. An NDA is one such step.

The agreement also provides tools that the Act does not expressly give:

• it precisely sets out what is confidential — including information that might not meet the statutory definition;
• it allows a contractual penalty to be stipulated, which is pursued without proving the amount of loss;
• it regulates the return or destruction of materials after cooperation ends;
• it designates the court with jurisdiction and the applicable law — important for foreign counterparties.

Typical situations in which it is worth signing

• talks with an investor or buyer of the business, combined with a review of the company's documents;
• cooperation with a subcontractor running their own firm, who works on source code, client databases or price lists;
• negotiations on a joint project, before the main contract is drawn up;
• handover of documentation to an accounting firm, auditor or IT company (here a separate personal data processing agreement under RODO (GDPR) is often also needed).

For employees under an employment contract the duty of discretion applies by operation of law: under Article 100 of the Labour Code, an employee must keep secret information whose disclosure could expose the employer to harm. A separate agreement is useful, however, to specify the scope of that information, and protection after employment ends is provided by a non-compete agreement for which the employer pays compensation.

Key clauses — a checklist

1. Parties and direction — whether information is disclosed by one party (one-sided agreement) or by both (mutual). It is worth covering also affiliated companies and advisers of the receiving party.
2. Definition of confidential information — categories (e.g. source code, client data, commercial terms, product plans) rather than the generality "all information". Too broad a definition makes enforcement harder, too narrow one leaves gaps.
3. Exclusions — information publicly available, previously known to the receiving party, obtained independently or disclosed on the demand of a court or authority.
4. Purpose and permitted use — e.g. solely to prepare an offer or perform a specific contract.
5. Persons with access — employees and associates who need to know the information, bound by a similar duty.
6. Duration — the term of cooperation plus a defined period after it ends. For secrets with long-term value (recipes, algorithms), protection can be set until the information becomes public.
7. Contractual penalty and damages — amount per breach and a reservation that the creditor may pursue damages exceeding the penalty.
8. Return and deletion of materials — deadline and confirmation method (e.g. a declaration of permanent deletion of files).
9. Applicable law and jurisdiction — especially with a counterparty from another country.

Contractual penalty — how to set it

Under Articles 483–484 of the Civil Code, a contractual penalty is due in the stipulated amount regardless of the amount of loss. Claiming damages above the penalty is possible only if the contract so provides — worth remembering when drafting the clause. The debtor may, however, demand a reduction of the penalty if it is grossly excessive.

Example: an IT firm gives a subcontractor access to a client's repository. The agreement provides PLN 50,000 of penalty per breach and the right to pursue higher damages. If the subcontractor shares a fragment of code with a competitor, the firm does not have to show how much it lost to claim the penalty. If the actual loss — e.g. losing the contract — is bigger, it can pursue the surplus by proving it on general rules. The penalty amount should bear a reasonable relation to the value of the protected information; a token amount does not deter, and an absurdly high one will be reduced by the court.

What if a breach occurs

• Contractual claims — contractual penalty, damages, demand to cease the breach.
• Claims under the Act on Combating Unfair Competition — among others, cessation of prohibited acts, removal of their effects, remedying the loss and surrendering unjustly obtained benefits. They are time-barred after three years, separately for each breach.
• Criminal liability — disclosing or using a trade secret in breach of duty, which causes serious harm, is punishable by a fine, restriction of liberty or imprisonment of up to 2 years.

In each of these tracks, evidence is key: which documents were handed over, to whom and when. For this reason it is worth keeping a disclosure register and marking files as confidential.

The most common mistakes

• A ready template downloaded from the internet, not adjusted to the type of information and the relationship.
• Signing the agreement only after disclosing the information.
• No contractual penalty or no reservation of additional damages.
• Failing to regulate what happens with the information after talks end.
• Discrepancies between the NDA and the later main contract — it is worth deciding which document prevails.

In cooperation with contractors running sole proprietorships, confidentiality clauses usually go into the main contract; care must then be taken that the whole does not resemble an employment relationship — the risk is described in the article on a contractor agreement reclassified as employment.

How Good Balance can help

We prepare NDAs tailored to the industry and type of information — in Polish and in bilingual versions — and confidentiality clauses for contracts with counterparties and subcontractors. Details are on the contract drafting page; for breach matters you are welcome to a legal consultation.