UNDERSTANDING NON-DISCLOSURE AGREEMENTS (NDAs)

Non-Disclosure Agreements (NDAs) in Sale–Purchase Transactions Under Kenyan Law

In a sale–purchase transaction in Kenya, a Non-Disclosure Agreement (NDA) can be initiated by either party, depending on the circumstances of the transaction. That notwithstanding, the general practice under Kenyan law is that, a Non-Disclosure Agreement (NDA) is overly initiated by the party disclosing confidential information (the Owner/Discloser) to ensure the protection of their trade secrets, business information, or personal data.

1.0 Who Initiates the NDA? Types of NDAs

(a) Seller – Most Common

The seller usually initiates the NDA, especially where:

• Confidential financial records will be shared
• Trade secrets or proprietary information are involved
• Due diligence is required before negotiations progress

This is common in:

• Business sales
• Share purchase transactions
• Asset acquisitions
• Real estate transactions involving sensitive valuation data

(b) Buyer

A buyer may initiate the NDA where:

• The buyer is disclosing funding sources
• The buyer is revealing investment strategy or proprietary acquisition structures
• The transaction involves competitive bidding

(c) Mutual NDA

In many structured transactions, parties sign a mutual NDA, meaning both sides agree to protect each other's confidential information.

2.0 Legal Parameters Under Kenyan Law

In Kenya, NDAs are governed primarily by contract law and related statutes. NDAs are primarily governed by the Law of Contract Act (Cap 23). The law provides the general framework for valid contract formation and enforcement. Additionally, Kenya relies on common law principles of confidentiality, which impose an equitable duty not to misuse or disclose confidential information. Complementary statutes such as the Companies Act, 2015; the Data Protection Act, 2019; and the Access to Information Act also influence the enforcement of NDAs, especially in cases involving data privacy, corporate governance, and public transparency.

(a) Contract Law Requirements

Under the Law of Contract Act, an NDA must satisfy the essential elements of a valid contract: Offer; Acceptance; Consideration; Intention to create legal relations; and Capacity of parties.

Without these elements, the NDA may be unenforceable.

(b) Confidentiality & Commercial Protection

While Kenya does not have a single standalone “Trade Secrets Act,” protection arises under:

• Common law principles of confidentiality
• The Trade Secrets Act (where applicable)
• The Competition Act (in cases of unfair competition or misuse of confidential information)

Courts in Kenya recognize and enforce confidentiality obligations where:

• Information has the necessary quality of confidence
• It was disclosed in circumstances importing an obligation of confidence
• There is unauthorized use or disclosure

(c) Data Protection Compliance

If the NDA involves personal data, compliance with the Data Protection Act is mandatory.

Key considerations:

• Lawful processing of personal data
• Data subject rights
• Security safeguards
• Restrictions on cross-border transfer

Failure to comply can attract regulatory penalties.

(d) Reasonableness & Public Policy

Kenyan courts will not enforce:

• Clauses that are overly broad or indefinite
• NDAs used to conceal illegal conduct
• Terms contrary to public policy

The duration and scope must be reasonable.

Limits of NDAs

NDAs are not absolute and must be balanced against public interest and constitutional rights. For instance, Article 35(1) of the Constitution of Kenya guarantees every citizen the right of access to information held by the state or other persons necessary for the exercise of a right or fundamental freedom. Courts have ruled that NDAs cannot be used to shield illegal activity or to obstruct legally mandated disclosure. Therefore, confidentiality limitations must be reasonable and justifiable under the law.

Kenyan court cases have established the principle that NDAs cannot be used to hide illegal activity or override legally sanctioned disclosures. In Khalifa & Another v Secretary, National Treasury & Planning & 4 Others; Katiba Institute & Another (Interested Party) (Constitutional Petition 032 of 2019), the court held that under Kenyan law, disclosure of information held by public bodies is the starting point, and exemption from disclosure is the exception. Hence, presumption favours disclosure of information and non-disclosure; the party seeking to exempt disclosure of information held by public bodies has the onus of proving the danger of disclosing the information, such as state security. The governing law is Article 35(1) and the Access to Information Act.

3.0 Key Clauses Required in a Kenyan NDA

A properly drafted NDA should include:

• Definition of confidential information
• Purpose limitation clause
• Non-disclosure obligations
• Permitted disclosures
• Term/duration
• Return or destruction of information
• Remedies (injunction, damages)
• Governing law clause (Kenyan law)
• Dispute resolution (litigation or arbitration)

4.0 Remedies for Breach in Kenya

If breached, the injured party may seek:

• Injunction (to stop further disclosure)
• Damages
• Account of profits
• Specific performance

N/B- Many NDAs include dispute resolution clauses, which may call for arbitration in accordance with the Arbitration Act 1995, with the option for interim relief through the courts.