Purchase or Sale Non-Disclosure Agreement

What is Purchase or Sale NDA?

A Purchase or Sale NDA is a legally binding agreement that prevents parties from disclosing confidential information exchanged during a potential business sale, asset purchase, or investment deal. This agreement ensures that sensitive data such as financial statements, business operations, customer lists, and trade secrets remains private. 

It is typically used when: 

• A business is being sold or acquired 
• A company is considering purchasing assets or shares 
• Investors or buyers need to review confidential financial details 
• Two parties are negotiating a merger, acquisition, or partnership

Why Do You Need a Sale/Purchase NDA? 

Here’s why you should always have an NDA in place: 

1. Protects Confidential Business Information

When selling a business or assets, you may need to share financial records, customer lists, contracts, and trade secrets with potential buyers. An NDA ensures that this information cannot be disclosed or used for competitive advantage. 

2. Prevents Competitors from Gaining an Unfair Advantage 

If the potential buyer is a direct competitor, they could use the insights gained during negotiations to gain a market advantage. A well-drafted NDA ensures they cannot use or disclose the confidential details for their benefit.

3. Ensures Serious Buyers Only 

A legally binding NDA discourages casual inquiries and ensures that only genuine and serious buyers engage in discussions. It protects sellers from wasting time on non-committed parties who may just be fishing for information. 

4. Maintains Business Stability & Employee Trust 

If employees, clients, or suppliers discover that your business is for sale, it could create uncertainty and affect operations. An NDA prevents potential buyers from disclosing your sale plans, ensuring business stability. 

5. Legally Enforces Confidentiality & Prevents Data Leaks 

Without an NDA, there is no legal obligation for the buyer to keep your business information private. If confidential details leak, it could harm your business reputation and market position. 

6. Protects You Even If the Deal Falls Through 

Not all business sales go through, but the information shared during the process remains valuable and sensitive. An NDA ensures that even if the sale doesn’t happen, your business information remains protected for a specified period. 

7. Covers Post-Sale Confidentiality 

Even after the sale, certain business details must remain confidential especially if you’re selling to a competitor. An NDA can include post-sale confidentiality clauses to prevent misuse of past data.

Parties Involved in Purchase and Sale of NDA 

This section clearly defines who is sharing and receiving confidential information under the NDA. 

1. Disclosing Party

The person or business entity selling a company, product, or valuable asset and sharing confidential details.

2. Receiving Party

The person, investor, or company interested in purchasing and receiving sensitive business information. 

Example: If Company A is selling a retail business and Company B is interested in acquiring it, Company A is the Disclosing Party, and Company B is the Receiving Party. 

Key Clauses of Sale and Purchase NDA

A Purchase or Sale NDA includes several crucial elements to ensure that confidential business information remains protected during negotiations. Below is a detailed breakdown of these key components: 

1. Definition of Confidential Information 

One of the most critical sections of an NDA, this clause outlines exactly what information is considered confidential and protected under the agreement.  

Common Types of Confidential Information in a Purchase or Sale NDA: 

• Financial Records: Profit and loss statements, tax returns, balance sheets 
• Customer Data: Client lists, purchasing behavior, contractual agreements 
• Business Strategies: Growth plans, pricing models, marketing strategies 
• Supplier & Vendor Information: Exclusive supplier contracts, costs, discounts 
• Intellectual Property: Patents, trademarks, proprietary technology 
• Operational Data: Employee details, logistics, production processes 

Why It Matters: Without a clear definition, the buyer might argue that certain information was not covered under confidentiality, leading to potential misuse. 

2. Purpose of Disclosure 

This section explains why the seller is sharing confidential information with the potential buyer. 

Typical purposes include:

• To evaluate a potential business acquisition 
• To assess intellectual property or patents for purchase 
• To conduct financial due diligence before an investment 
• To examine assets or shares for a purchase decision 

Why It Matters: The NDA limits the use of confidential information to only the stated purpose, preventing misuse for other competitive or personal advantages. 

3. Confidentiality Duration 

This clause defines how long the Receiving Party must keep the information confidential, even if the deal does not go through. 

Standard NDA Durations:

• 2-5 years: For general business transactions 
• Indefinite: For trade secrets or highly sensitive information 

Why It Matters: Without a set duration, confidentiality obligations might expire too soon, putting your business at risk.

4. Restrictions on Use & Disclosure

This section outlines what the Receiving Party cannot do with the confidential information. 

The Buyer Cannot: 

• Share the information with third parties (e.g., competitors, suppliers) 
• Use the information to start a competing business 
• Disclose financial or business details even after the deal falls through 

Additional Protective Measures:

• NDA can specify that only certain employees or advisors of the Receiving Party may access the confidential information. 
• It can also require the Receiving Party to destroy or return all confidential documents if the deal is not finalized. 

5. Exclusions from Confidentiality

Not all information is protected under an NDA. This section defines what is NOT considered confidential and does not fall under the NDA’s restrictions. 

Common NDA Exclusions:

• Publicly available information 
• Information already known to the buyer before signing the NDA 
• Information independently developed by the buyer without access to the seller’s data 
• Information disclosed by a third party with no confidentiality obligations 

6. Consequences of Breach

This clause specifies what happens if the Receiving Party violates the NDA and discloses or misuses confidential information. Without this clause, enforcing the NDA becomes difficult, and the seller may struggle to claim damages. 

Legal Actions for Breach: 

Monetary Compensation: The seller can claim financial damages for losses caused by unauthorized disclosure. 

Court Injunctions: A legal order can stop the buyer from further misuse or disclosure. 

Contract Termination: The seller can cancel the deal immediately if the buyer breaches confidentiality. 

7. Governing Law & Dispute Resolution

This section determines which legal framework will apply if there is a dispute over the NDA. 

Jurisdiction: Specifies which state or country's laws will govern the NDA (e.g., Indian Contract Act, 1872). 

Dispute Resolution: Defines whether disputes will be settled through mediation, arbitration, or court proceedings.

Do’s and Don’ts When Using Purchase or Sale NDA

Know the Law

In India, the validity of NDAs is governed by the Indian Contract Act, 1872 (Sections 10, 14, 23, and 27). NDAs must be lawful and voluntary. Reasonable restrictions on trade to protect confidentiality are allowed under Section 27.

How DigiLawyer can Help?

DigiLawyer draft legally verified Sale/Purchase Agreement to protect sensitive business information during collaborations, partnerships, or negotiations. Our templates cover key aspects like confidentiality, duration, and breach consequences, ensuring both parties are equally bound. 

We ensure compliance with the Indian Contract Act, 1872 and the Arbitration and Conciliation Act, 1996, offering a solid legal foundation. Whether you need a standard template or customized clauses for non-compete or non-solicitation, we’ve got you covered.

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