Non-disclosure agreement

When one or more interested potential buyers have signed up, negotiations can begin. Before any agreement is signed, the seller will want to ensure that the information it is going to disclose to the potential buyer(s) remains confidential. One way to achieve this is to enter into a non-disclosure agreement. The potential buyer will commit himself to treat the obtained information as strictly confidential and not to disclose it to other parties or third parties without the seller’s explicit consent. This should include a list of information that is labelled as “confidential” and explain how information will be exchanged.

An NDA may be accompanied by a non-compete and nonsolicitation clause whereby the potential buyer commits himself not to “solicit” customers or contracts from the vendor. Articles 1625 and 1626 of the Civil Code, which impose an obligation to indemnify the seller against execution, are fully applicable to the asset deal.

For example, Article 1625 of the Civil Code stipulates: “The indemnification which the seller is obliged to provide towards the buyer has a dual purpose: firstly, it concerns the undisturbed possession of the sold object and, secondly, the hidden defects

of that object or the defects that destroy the sale.” (loosely translated)

In addition, Article 1626 of the Civil Code stipulates that: “even if no provision for indemnification was made at the time of the sale, the seller is obliged by law to indemnify the buyer against the eviction of all or part of the sold object, or against the charges that someone claims to have on that object, and which were not specified at the time of the sale.” (loosely translated)

A non-disclosure agreement, accompanied by a non-compete and/or non-solicitation clause are useful tools to protect you as a party. In addition, you can always fall back on the provisions of the Civil Code.