- How do you legally secure the confidential information you share with your suppliers?
- How do you legally bind the service you need from your suppliers?

The Non Disclosure Agreement
Before entering any discussions with any external part you should consider to have a Non Disclosure Agreement (NDA, also called Confidentiality Agreement or Confidential Disclosure Agreement) in place. The NDA is a legal contract between minimum two parties that want to share confidential information with each other while restricting any other parties to get that information. This legally binding document, prevents anyone at either of the companies to share received information outside their companies.

After you have finalized your initial discussions, legally covered by the NDA, you might want to do business with some of the companies you have discussed with: you want to appoint them as your suppliers of goods or services.

In any relationship, personal or business, there will be ups and downs and smaller or bigger problems. When the problems occur it is important that you have discussed and agreed on the rules of the game before you enter the relationship. If you have done this once and agreed on a legally binding contract before you start the real relationship, you will have a much smoother, more efficient and a safer business relationship going forward. When the problems occur, because they will, you have a document (your contract with terms and conditions) describing the basic rules for the relationship and the responsibilities of each party. So in short, the general terms and conditions is a common guide line to follow if either party for some reason doesn’t deliver according to agreed set up.

Common pitfalls

- Starting to talk to your potential suppliers about confidential information without having an NDA in place and one of your suppliers goes to your competitors with this information. This could be a disaster for your business.

- One of your suppliers which you don’t have any agreed terms and conditions with, has delivered products to you with poor quality. In your processes you failed to discover the poor quality and therefore shipped substandard products to your customers. Your customers discover this and contact your company with complaints and compensation requests . You are obliged to replace their substandard products and give them compensation. You understand that the root cause of this quality issue comes from your supplier, but your supplier is not willing to compensate you as you have no agreement covering this issue. This means that you alone need to take the loss for the compensation to your customers.

- In some cases you and your company will be pushed and stressed by the supplier to finalize the agreement due to a better deal e.g. better price – do not fall for this instead continue to negotiate according to your negotiation tactics

- You have signed an agreement without knowing all risks. When you negotiate an agreement you should perform a risk/”what if” analysis of the legal parts (liability etc) and the commercial parts, driven by volumes and cost (e.g. support, defects, payment, delivery terms etc). In this analysis you should also, if applicable, compare your sales agreement with your purchasing agreement in order to avoid or minimize any negative discrepancy between those agreements