Non-disclosure agreement

How BC law treats it

BC has no statute governing NDAs or trade secrets. An NDA is a contract, so the ordinary rules of formation, interpretation and remedies apply. It may be a stand-alone agreement (one-way or mutual) or a clause, commitment or undertaking inside a larger contract such as an employment agreement, letter of intent or share purchase agreement. It can be signed electronically under the Electronic Transactions Act, SBC 2001, c 10. A typical NDA defines confidential information, states the permitted purpose, limits who may receive it, excludes information that is public, already known or independently developed, sets a term, and requires return or destruction of materials. Courts read vague definitions narrowly, and an NDA that tries to cover everything may protect nothing clearly. Even without a contract, the equitable action for breach of confidence protects information that has the necessary quality of confidence, was shared in circumstances importing an obligation of confidence, and was misused to the owner's detriment (Lac Minerals Ltd v International Corona Resources Ltd, [1989] 2 SCR 574). Remedies can include an injunction, damages, an accounting of profits or a constructive trust (Cadbury Schweppes Inc v FBI Foods Ltd, [1999] 1 SCR 142). Interim injunctions are the most practical remedy, because disclosed information cannot be recalled. A party seeking one in the BC Supreme Court must move quickly and usually give an undertaking to pay damages if the injunction later proves unjustified.

What it means for your business

An NDA is often the first document signed in a deal, investment pitch, supplier relationship or hire. It controls what the other side may do with your pricing, code, customer lists and plans, and it gives you a clear basis for an injunction if they misuse it. For the recipient, a badly scoped NDA can restrict future business or create liability for ordinary competitive activity. Mutual NDAs in M&A also often include non-solicitation and standstill terms that deserve separate attention. Example: A Burnaby manufacturer shares its production process with a potential buyer under a mutual NDA during due diligence. When the deal collapses and the buyer starts building a similar line, the manufacturer seeks an injunction based on the NDA and breach of confidence.

Risks and common mistakes

Defining confidential information so broadly that it includes public or already-known material. Leaving out the permitted purpose, so misuse is hard to prove. Sharing sensitive information before the NDA is signed. Forgetting to require return or destruction of materials when talks end. Relying on an NDA alone without marking documents and limiting internal access.