The importance and guidelines for implementing non-disclosure agreements (NDA) in enterprises

A Non-Disclosure Agreement plays a pivotal role in protecting trade secrets. The following article provides a detailed explanation of the role of Non-Disclosure Agreements, their types, signing authority, common mistakes, relevant legal regulations, and guidance on effective drafting, helping enterprises minimize legal risks and safeguard sensitive information.

I. The impact of Non-Disclosure Agreements on enterprises

A Non-Disclosure Agreement (NDA) is an important legal instrument that enables enterprises to protect sensitive information, trade secrets, and critical data. Executing a Non-Disclosure Agreement helps prevent information leakage, protect competitive advantages, and minimize legal risks in the cases of disputes.

At the same time, a Non-Disclosure Agreement provides a legal basis for enterprises to claim compensation when information is unlawfully disclosed, while strengthening credibility and trust with partners, investors, and employees. Proper implementation of a Non-Disclosure Agreement also assists enterprises in complying with regulations on personal data protection, ensuring that all commercial transactions are conducted transparently and securely.

II. Understanding Non-Disclosure Agreements 

A Non-Disclosure Agreement helps clearly define the rights and obligations of the parties involved, prevent unauthorized disclosure of information, and provide a legal basis for addressing violations.

1. What is a Non-Disclosure Agreement and why is it important in business?

A Non-Disclosure Agreement (NDA) is a legally binding contract between two or more parties under which the parties undertake to maintain the confidentiality of sensitive information, business data, or intellectual property to which they gain access during cooperation, negotiations, or commercial transactions. Non-Disclosure Agreements play a significant role in business operations because they:

• Protect sensitive information: Preventing the risk of data leakage, formulas, strategies, or customer information.
• Maintain competitive advantage: Enabling enterprises to safeguard business know-how from competitors or third parties.
• Provide a legal basis for handling violations: If a party unlawfully discloses information, the Non-Disclosure Agreement provides grounds for claiming damages or taking legal action.
• Build trust in cooperation: When parties are assured that information will remain confidential, they are more willing to share critical data, thereby promoting effective collaboration.

In summary, a Non-Disclosure Agreement is not only an instrument for protecting information but also a strategic mechanism that enables enterprises to operate safely and sustainably in a competitive environment.

2. What types of Non-Disclosure Agreements exist and how do they differ?

In commercial and legal relationships, a Non-Disclosure Agreement (NDA) is used to protect sensitive information exchanged between parties during cooperation. Depending on the direction of information flow and the number of participating parties, Non-Disclosure Agreements are generally categorized into three principal types.

• First, a Unilateral Non-Disclosure Agreement is an agreement in which only one party discloses confidential information while the other party is obligated to maintain confidentiality. Such a type is commonly used when an enterprise shares data, business plans, or project ideas with investors, contractors, or freelancers. Its primary purpose is to protect the interests of the disclosing party and reduce the risk of information leakage.
• Second, a Bilateral or Mutual Non-Disclosure Agreement applies when both parties exchange confidential information and are mutually bound by confidentiality obligations. Such a form is commonly used in cooperative relationships, joint ventures, or merger negotiations where both parties possess sensitive information that requires protection.
• Finally, a Multilateral Non-Disclosure Agreement arises when three or more parties are involved and all parties assume obligations to maintain the confidentiality of the shared information. Such type of Non-Disclosure Agreement is appropriate when a group of investors or multiple organizations collaborate on the same project, as it eliminates the need for multiple separate Non-Disclosure Agreements and establishes a unified confidentiality mechanism among all parties.

Accordingly, the selection of the appropriate type of Non-Disclosure Agreement should be based on the number of participating parties and the flow of information among them. Proper application of the correct type of Non-Disclosure Agreement not only protects sensitive information but also ensures legal rights and minimizes dispute risks during business cooperation.

3. Who has the authority to request the execution of a Non-Disclosure Agreement in a commercial transaction?

The right to request the execution of a Non-Disclosure Agreement generally belongs to the party that owns or controls the sensitive information involved in the transaction. It may include an enterprise, organization, or individual seeking to protect trade secrets, strategic plans, customer data, technology, or proprietary products. Requesting the execution of a Non-Disclosure Agreement constitutes a legitimate legal measure to ensure that the receiving party assumes confidentiality obligations and to reduce the risk of information leakage or misuse.

Accordingly, any party possessing sensitive information has the right to require the signing of a Non-Disclosure Agreement in order to protect its legal interests and ensure information security in commercial transactions.

4. What common mistakes do companies make when implementing Non-Disclosure Agreements?

In commercial practice, many companies face legal risks due to improper implementation of Non-Disclosure Agreements. Common mistakes include:

• Failure to clearly define the protected information: Non-Disclosure Agreements that are overly general and do not specify the types of information considered confidential may lead to difficulties in enforcement.
• Lack of provisions on the confidentiality period: Failure to clearly define the duration of confidentiality obligations may lead to disputes when information is used after a certain period.
• Unclear rights and obligations: Non-Disclosure Agreements that do not specify responsibilities for handling, safeguarding, or limiting the use of information may make it difficult to address violations by the receiving party.
• Signing the Non-Disclosure Agreement too late or not signing at all: Exchanging sensitive information before executing a Non-Disclosure Agreement may eliminate the legal basis for protecting such information.
• Absence of enforcement mechanisms: Non-Disclosure Agreements that do not stipulate legal consequences for violations may hinder the ability to claim compensation or prevent information leakage.

These mistakes mainly arise from inadequate drafting and implementation of Non-Disclosure Agreements. Clearly defining rights, obligations, and enforcement mechanisms is a main factor in protecting sensitive information and ensuring legal enforceability in commercial transactions.

III. Legal regulations relating to Non-Disclosure Agreements 

A Non-Disclosure Agreement (NDA) must be implemented within the framework of Vietnamese and international law. Therefore, understanding and complying with relevant legal regulations is essential to ensure legal validity, protect the rights of the parties, and minimize dispute risks. These regulations not only define the scope and obligations of confidentiality but also establish legal consequences for violations of a Non-Disclosure Agreement.

1. If a party violates a Non-Disclosure Agreement, does the other party have the right to claim damages?

Pursuant to Article 419 of the Civil Code 2015, a party suffering damage due to a breach of contract, including a breach of a Non-Disclosure Agreement (NDA), has the right to request compensation for damages. Specifically:

• The non-breaching party may claim compensation for the benefits that it would have otherwise obtained from the contract (Clause 2 Article 419).
• The non-breaching party may also claim reimbursement of costs incurred due to the breaching party’s failure to perform its obligations, provided that such costs do not overlap with compensation for contractual benefits.
• Where necessary, the Court may require compensation for non-material damage, with the amount determined based on the nature and consequences of the violation (Clause 3 Article 419).

Accordingly, a breach of a Non-Disclosure Agreement constitutes not only a breach of contractual obligations but may also lead to liability for compensation for material damage and, in certain circumstances, non-material damage in order to protect the lawful interests of the non-breaching party.

2. Does the personal data protection law affect the execution of Non-Disclosure Agreements?

The execution of Non-Disclosure Agreements in commercial transactions must comply with the Personal Data Protection Law 2025 because they often involve the exchange and protection of personal information. Specifically:

• Protection of sensitive personal data: When a Non-Disclosure Agreement involves data relating to children, persons with limited civil act capacity, employees, health information, financial or banking data, credit data, or biometric data, both the disclosing party and the receiving party must process such data strictly within the intended purpose and necessary scope while ensuring the lawful rights of data subjects (Articles 24 to 32).
• Consent of data subjects: The sharing of personal data within a Non-Disclosure Agreement requires the consent of the data subject, except where otherwise provided by law (Articles 24, 25, 26, and 28).
• Limitations on use and retention: The Non-Disclosure Agreement must clearly specify the purpose of using the information, the retention period, and security measures in order to comply with legal requirements on personal data protection (Articles 25 to 32).
• Legal liability: Violations of personal data protection regulations in the implementation of a Non-Disclosure Agreement may result in administrative or civil liability, in addition to contractual liability for damages.

Therefore, the Personal Data Protection Law 2025 has a direct impact on the drafting and implementation of Non-Disclosure Agreements, requiring the parties to clearly identify sensitive information and comply with the principles of consent, limited use, and data security to ensure both the legal validity of the Non-Disclosure Agreement and the lawful rights of personal data subjects.

3. Is it necessary to notify other relevant parties about a Non-Disclosure Agreement?

Pursuant to Article 4 of the Personal Data Protection Law 2025, personal data subjects have rights including the right to be informed about data processing activities, the right to consent or withdraw consent, the right to request the provision, deletion, or restriction of data processing, and the right to request protective measures for their data. Therefore, when a Non-Disclosure Agreement involves personal information, the sharing of such data with third parties must ensure:

• Notification and consent of the data subject before sharing information with other related parties, in order to ensure the data subject’s right to be informed, the right to consent, and the right to restrict data processing (Clause 1 Article 4).
• Limitation of information access by parties outside the Non-Disclosure Agreement unless consent from the data subject has been obtained or otherwise permitted by law.

Accordingly, notifying or obtaining consent when sharing personal data under a Non-Disclosure Agreement with third parties is necessary if the information involves personal data, thereby ensuring compliance with the rights of data subjects, preserving the legal validity of the Non-Disclosure Agreement, and avoiding legal violations.

IV. Questions relating to Non-Disclosure Agreements

In commercial practice, Non-Disclosure Agreements often raise numerous questions concerning the scope of confidentiality, the rights and obligations of the parties, legal liability for breaches, and the relationship between Non-Disclosure Agreements and legal regulations on personal data protection. Clarifying these issues helps parties understand their obligations and rights, thereby ensuring legal validity and minimizing dispute risks.

1. If a company employee violates a Non-Disclosure Agreement, can the company be held liable?

Pursuant to Article 597 of the Civil Code 2015, a legal entity (company) must compensate for damage caused by its employees during the performance of assigned duties. In the context of a Non-Disclosure Agreement, if an employee breaches confidentiality obligations, the company may be deemed legally responsible to the injured party. After paying compensation, the company has the right to request the employee to reimburse part or all of the compensation depending on the degree of fault and internal agreements.

2. Can a party initiate legal proceedings for violation of a Non-Disclosure Agreement even when there is no main contract?

Under Article 186 of the Civil Procedure Code 2015, agencies, organizations, or individuals have the right to initiate legal proceedings themselves or through a lawful representative before a competent Court to protect their lawful rights and interests. Therefore, if a party fails to comply with a Non-Disclosure Agreement, the injured party may still initiate legal proceedings even when the Non-Disclosure Agreement was signed prior to the execution of a formal contract, provided that the Non-Disclosure Agreement clearly reflects the parties’ intention to create binding legal obligations regarding confidentiality.

In such cases, the Court may consider the Non-Disclosure Agreement as an independent agreement and evaluate whether the parties intended to establish legal obligations. If a violation is proven, the injured party may claim damages or request other legal remedies.

3. How are disputes relating to Non-Disclosure Agreements resolved?

Pursuant to Clause 4 Article 2 of Resolution No. 01/2014/NQ-HĐTP, disputes relating to Non-Disclosure Agreements may be resolved by Arbitration or by the Courts, depending on the agreement between the parties.

If the parties have agreed to resolve disputes through Arbitration, the claimant may not simultaneously request the Court to resolve the same dispute. The Court will refuse to accept the case or suspend the proceedings if it determines that the dispute has already been submitted to Arbitration.

If the parties have not clearly agreed on arbitration or arbitration proceedings have not yet been initiated, the Court may accept the case under the general procedural rules, but must determine whether either party has already initiated arbitration proceedings.

Once a dispute has been accepted for resolution by either the Court or Arbitration, it cannot be resolved again by the other mechanism in order to avoid duplication and conflicting decisions.

Accordingly, the resolution of disputes concerning Non-Disclosure Agreements must comply with the parties’ agreement on the dispute resolution body and the applicable law on commercial arbitration.

4. Must a Non-Disclosure Agreement be made in writing?

In commercial practice and to ensure legal validity and enforceability, a Non-Disclosure Agreement should be established in written form and signed by the participating parties. As Non-Disclosure Agreements generally constitute civil agreements on information confidentiality, a written document is essential to avoid disputes and to establish clear evidentiary grounds in case of violations. Oral Non-Disclosure Agreements are difficult to prove and enforce before a Court or Arbitration due to the absence of clear records regarding the terms and agreements of the parties.

In employment relationships, the law also requires confidentiality agreements to be made in writing and signed to clearly establish commitments between the employee and the employer. Pursuant to Article 14 of the Labour Code 2019, employment contracts must be concluded in writing, except for contracts with a term of less than one month which may be agreed orally.

Therefore, to ensure legal certainty and enforceability in the cases of disputes, establishing a Non-Disclosure Agreement in written form with signatures and clear evidence regarding its scope, content, and duration of confidentiality is essential in business transactions, recruitment, and cooperation between parties.

5. How can an effective and comprehensive Non-Disclosure Agreements be drafted?

To ensure that a Non-Disclosure Agreement effectively protects the interests of the parties, its drafting should comply with fundamental principles and include essential legal provisions.

• Clearly identifying the participating parties and the purpose of the Non-Disclosure Agreement: Specifying the names, roles, and purpose of information sharing to define the scope of confidentiality accurately.
• Defining confidential information: Clearly identifying what information is considered confidential, including technical, business, financial, strategic, or personal data, in order to avoid disputes regarding the scope of protection.
• Rights and obligations of the parties: Including confidentiality obligations, restrictions on information use, liability for violations, and enforcement measures.
• Confidentiality duration and scope of application: The confidentiality period should correspond to the nature of the information and the purpose of disclosure; geographical scope, recipients, and security methods should also be specified.
• Dispute resolution mechanisms: Clearly specifying whether disputes will be resolved by Arbitration or the Courts in accordance with applicable law.
• Additional provisions: These may include termination conditions, the right to claim damages, and additional obligations relating to personal data where applicable.

A Non-Disclosure Agreement should be executed in written form, signed by the parties, and supported by evidence regarding the agreement, the scope of information, and confidentiality obligations to ensure enforceability before Courts or Arbitration in the event of a breach.

V. Are you looking for a reputable lawyer to assist with Non-Disclosure Agreement-related issues?

If you are encountering difficulties in drafting, reviewing, or resolving disputes related to Non-Disclosure Agreements, NPLaw provides professional legal services with a team of experienced lawyers specializing in contracts, information confidentiality, and personal data protection. We provide detailed advice on the types of Non-Disclosure Agreements suitable for business needs, draft and review agreements to ensure legal validity and enforceability, and assist in dispute resolution, claims for damages, or handling violations before Courts or Arbitration, while always ensuring absolute confidentiality of client information.

The above information is provided for reference purposes only. For detailed legal advice regarding a specific case, please contact NPLaw for prompt consultation.