NDA Enforceability in Texas: A Practical Guide
NDAs in the Texas Business Landscape
Non-disclosure agreements are standard in Texas across oil and gas, technology, healthcare, and manufacturing industries. They protect proprietary information from being shared with competitors or the public.
Texas Law on NDAs
Texas enforces NDAs under general contract law principles and the Texas Uniform Trade Secrets Act (Tex. Civ. Prac. & Rem. Code Chapter 134A). Unlike California, Texas does not have a blanket prohibition on restrictive covenants, making NDAs generally more enforceable here.
Texas courts evaluate NDAs using standard contract principles. In In re Bass (2000), the Texas Supreme Court upheld the enforceability of confidentiality agreements when they are ancillary to an otherwise enforceable agreement and contain reasonable terms.
Factors Courts Consider
- Ancillary to an enforceable agreement — Under the Texas Business and Commerce Code Section 15.50, a covenant not to disclose must be ancillary to or part of an otherwise enforceable agreement. This typically means it accompanies an employment relationship or business transaction
- Reasonable scope — The definition of confidential information must be specific enough to give the signer fair notice of what they cannot disclose
- Supported by consideration — There must be valid consideration, such as employment, access to trade secrets, or a business deal
- Not overly broad in duration — While Texas does not set a fixed time limit, perpetual NDAs may face scrutiny depending on the type of information protected
Red Flags
- The NDA lacks a clear definition of what constitutes confidential information
- It attempts to cover information that is already publicly known or easily discoverable
- The agreement has no time limitation whatsoever
- Penalty provisions that seem designed to punish rather than compensate for actual harm
When to Consult a Lawyer
Consider consulting a Texas attorney if you are asked to sign an NDA with an extremely broad scope, no time limitation, or penalty clauses that seem disproportionate. A lawyer can assess whether the NDA meets the ancillary agreement requirement under Texas law.
This article is for informational purposes only and does not constitute legal advice. Consult a licensed attorney for guidance specific to your situation.