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If you have signed a contract, you are obligated to follow and comply with its terms. If you do not, you could face court action. For instance, a court could enforce the agreement or ask you to pay damages to compensate the other party. A common contract that you may have encountered is a non-disclosure agreement. A non-disclosure agreement is a legally binding contract that creates a confidential relationship between its signees. However, individuals are increasingly signing non-disclosure agreements over the internet. This may cause issues as to their enforceability. Therefore, this article will explain whether online non-disclosure agreements are valid in New Zealand. 

What is a Non-Disclosure Agreement?

A non-disclosure agreement is a legally enforceable contract that parties can enter into. The contract binds one party to confidentiality for either a specific piece of information or certain information more generally. The information must remain confidential until the expiration of the non-disclosure agreement or through any other circumstances outlined in the agreement. Non-disclosure agreements are particularly useful when dealing with sensitive information, such as trade secrets, business plans or proprietary information.

For example, business’ employees are commonly bound to secrecy through non-disclosure agreements. This might be the case where a business is working on a project that they do not want leaked to the public domain. Importantly, if the information is leaked, competitors may be able to steal the idea.

Another example where a party may use a non-disclosure agreement is to ensure that the cast and crew of a movie cannot leak its plot before the movie comes out.

What Are the Elements of a Legally Binding Contract?

For a contract to be legally enforceable, it must contain several elements. If a contract does not have these elements, the contract will not be legally binding.

Clear Offer

For there to be a binding contract, there first must be a clear offer conveyed from one party to the other. You can convey the offer verbally or through writing. The offer must clearly state the terms that the parties are to contract on. Moreover, you must deliver the offer in an understandable manner.

Acceptance of the Contract

The party receiving the offer must also validly accept the contract before it becomes legally binding. Importantly, the acceptance of the contract must be in the form that the contract specifies. 

For example, if the contract states that you can only accept it by delivering the contract back, no other forms of acceptance will be valid.

Sufficient Consideration

Consideration is a benefit or detriment that both parties receive from the contract. Therefore, both parties must receive some form of consideration. A contract without consideration from either party is a ‘gratuitous promise’, which is not legally enforceable.

Intention to Be Binding

Both parties must also intend for the contract to be binding. If one party believes that the contract is not binding, the contract will likely be unenforceable. This is why it is important that both parties are aware that a court can enforce a contract if it is legally binding. 

Unambiguous Terms

Finally, a contract must also have unambiguous terms. Specifically, a contract’s terms cannot have multiple meanings. This is because it can create disputes between the parties over the contract’s interpretation. Therefore, if there are ambiguous terms in the contract, the court is likely to find that term unenforceable.

Are Online Non-Disclosure Agreements Valid?

As long as the agreement meets all the terms of a binding contract above, the agreement will be valid. 

The most contentious element for an online agreement is the requirement that the parties must intend to be bound by the contract. This is because many people may not realise that an online agreement is binding. As such, the agreement may not be enforceable in court.

Therefore, if you are entering into an online agreement, you should ensure that the contract clearly states that it is a legally binding contract.

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Key Takeaways

Entering into a legally binding contract creates trust and protects both parties in case of a dispute. Non-disclosure agreements allow a party to protect the information it has shared with another party. A non-disclosure agreement is legally valid as long as it meets all the elements of a binding contract. For online non-disclosure agreements, the main issue is whether either party intended for the agreement to be binding. For legal assistance with managing your contracts, contact LegalVision’s contract lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

Can either party to a non-disclosure agreement cancel at any time?

No, while there might be a termination clause in the contract, parties can only use it if they meet the specific circumstances in the clause. Alternatively, parties can cancel a non-disclosure agreement if both parties consent to it.

What happens if a court finds that my non-disclosure agreement is not binding?

If a non-disclosure agreement is unenforceable, parties to the contract are not bound to follow its terms.

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