Can Unmarried Business Partners Enforce Verbal NDAs?

Introduction

Unmarried co-founders may share business plans, customer information, pricing strategies, formulas, software, financial data, and other confidential material without signing a formal confidentiality agreement. The absence of marriage is generally irrelevant. The more important questions are whether a binding agreement existed, whether the information was confidential, and whether the parties’ conduct shows an intention to keep it private.

A verbal non-disclosure agreement may be enforceable under Philippine law, but proving its terms and showing that the information qualifies as a protected trade secret can be difficult. The claimant must establish more than the fact that the parties once discussed confidentiality. The evidence should show the existence of consent, the confidential character of the information, the duty not to disclose or use it, and the resulting breach or threatened breach.

What Is a Verbal Non-Disclosure Agreement?

A non-disclosure agreement is an agreement restricting the disclosure or unauthorized use of confidential information. It may be written, verbal, express, or implied from the parties’ conduct, depending on the circumstances.

Under Article 1315 of the Civil Code, contracts are perfected by mere consent. From perfection, the parties are bound not only by express stipulations but also by consequences consistent with good faith, usage, and law (Civil Code of the Philippines).

Thus, a verbal NDA may exist where the parties clearly agreed that specified information would remain confidential and would not be disclosed or used outside the business relationship. The agreement may be inferred from statements, emails, messages, meetings, company practices, or the circumstances under which the information was shared.

Does the Parties’ Unmarried Status Matter?

Generally, no. Philippine contract law does not make marital status a requirement for business partners to create enforceable obligations. Two unmarried individuals may form a partnership, co-ownership arrangement, joint venture, or other business relationship, subject to the applicable legal requirements.

The Civil Code recognizes that a partnership has a juridical personality separate and distinct from that of its partners (Article 1768, Civil Code). A partnership may generally be constituted in any form, except when immovable property or real rights are contributed, in which case a public instrument is required (Article 1771, Civil Code) (Civil Code of the Philippines; Civil Code of the Philippines).

The absence of a written partnership agreement does not automatically eliminate every obligation between the parties. In “Chui v. Bentec,” G.R. No. 929, 1903, the Supreme Court recognized that a verbal partnership agreement may be valid between the parties when the essential requisites of a contract are present, even where writing or registration is required for other purposes.

What Must Be Proved to Enforce the Verbal NDA?

A claimant seeking to enforce a verbal NDA should generally prove the following:

• Consent: The parties agreed, expressly or impliedly, that specified information would be kept confidential.
• Subject matter: The information covered by the obligation was sufficiently identifiable.
• Confidentiality duty: The recipient understood that disclosure or unauthorized use was prohibited or restricted.
• Breach: The recipient disclosed, copied, appropriated, or used the information beyond the agreed business purpose.
• Damage or threatened injury: The breach caused loss or created a legally protectable risk of loss.

The agreement need not use technical words such as “trade secret” or “non-disclosure agreement.” However, vague assertions that “everything discussed between us was confidential” may be difficult to enforce unless supported by the parties’ conduct and the nature of the information involved.

When Does Silence or Non-Disclosure Become Fraud?

Failure to disclose information is not automatically fraud. Article 1339 of the Civil Code provides that nondisclosure may constitute fraud when there is a duty to reveal facts, such as when the parties are bound by confidential relations (Civil Code of the Philippines).

This rule concerns a duty to disclose material information in appropriate circumstances. It should not be treated as a general rule that every business communication creates a confidentiality duty. The claimant must still show why the relationship, undertaking, or circumstances imposed the duty.

Article 1341 further provides that a mere expression of opinion does not constitute fraud unless made by an expert and relied upon because of the expert’s special knowledge (Civil Code of the Philippines). This distinction matters when the alleged confidential information consists only of business predictions, opinions, or general advice rather than proprietary information.

What Information May Qualify as a Trade Secret?

Not every business document or idea is a trade secret. The information should possess characteristics that distinguish it from publicly known or readily available material.

The Supreme Court’s quoted authority in “In Re: Lazaro-Javier,” G.R. Nos. 256282, 256559 & 257049, 2026, describes a trade secret as a plan, process, tool, mechanism, formula, compound, or compilation of information used in business, known only to the owner and necessary confidential employees, and capable of giving the owner an advantage over competitors who do not possess it (In Re: Lazaro-Javier).

The same authority recognizes that trade-secret information may include technical or commercial information. Examples may include a secret formula, operating process, specialized customer list, pricing method, source code, marketing plan, or proprietary business system.

The information should ordinarily satisfy three practical conditions:

• It is not generally known or readily accessible to competitors.
• It has commercial value because it is confidential.
• The owner took reasonable steps to preserve its secrecy.

Consequently, a founder who freely posts the information online, distributes it without restrictions, or shares it with numerous persons without safeguards may have difficulty proving that the information remained confidential.

How Does the Statute of Frauds Affect a Verbal NDA?

The Statute of Frauds may be raised when an agreement is not in writing and falls within the categories covered by Article 1403 of the Civil Code. Its application, however, is limited and should not be treated as a universal rule invalidating oral business agreements.

In “Cordial v. Miranda,” G.R. No. 135495, 2000, the Supreme Court recognized that the Statute of Frauds applies to executory agreements. A verbal agreement that has been completed, executed, or partially performed is generally not barred on that ground (Cordial v. Miranda).

This principle may assist a claimant who can show that the parties already exchanged confidential information, acted under an understanding of confidentiality, or performed business obligations based on the oral arrangement. Nevertheless, partial performance does not eliminate the need to prove the actual terms of the confidentiality obligation.

The principal evidentiary problem is therefore not only whether the oral agreement is legally permissible. It is also whether the claimant can establish what information was covered, how long confidentiality was required, what uses were prohibited, and whether the alleged disclosure fell within the agreement.

What Duties May Arise Between Business Partners?

Partners owe duties to the partnership and to one another. Article 1807 of the Civil Code requires every partner to account for benefits and hold as trustee for the partnership profits derived without the consent of the other partners from transactions connected with the partnership or from the use of partnership property (Civil Code of the Philippines).

This provision may become relevant where one partner takes a business opportunity, customer list, process, or other partnership-related asset for personal benefit. The claim may involve more than breach of confidentiality; it may also involve accounting, restitution, fiduciary duties, or misuse of partnership property.

The firm name rules also recognize that partnership identity may carry legal consequences. Article 1815 provides that a partnership operates under a firm name and that a non-member who includes his or her name in the firm name may be subject to the liability of a partner (Civil Code of the Philippines). The provision does not itself create a non-disclosure obligation, but it illustrates that the legal consequences of a business relationship may depend on how the parties represented and conducted themselves.

Can the Parties’ Conduct Establish Confidentiality?

Yes, in appropriate circumstances. A court may examine the entire relationship rather than rely on a single conversation. Relevant evidence may include:

• Statements that information was “for our business only” or “not for disclosure.”
• Restricted access to files, applications, accounts, or premises.
• Passwords, access controls, confidentiality labels, or internal policies.
• Messages instructing the recipient not to share particular information.
• Evidence that the information was given only because of the business relationship.
• The recipient’s subsequent acknowledgment that the information was confidential.

The parties’ conduct is particularly important where the alleged agreement was never reduced to writing. Consistent safeguards may demonstrate that the parties treated the information as confidential, while unrestricted disclosure may support the opposing inference.

What If the Parties Created a Simulated Agreement?

Business partners sometimes use one document to conceal another arrangement. Article 1345 of the Civil Code distinguishes absolute simulation, where the parties do not intend to be bound at all, from relative simulation, where the parties conceal their true agreement (Civil Code of the Philippines).

In “Burgundy Realt Corp. v. Bella, et al.,” G.R. No. 268562, 2025, the Supreme Court recognized that courts may examine the true agreement in cases involving simulated contracts when public policy and equity require it. The case also emphasized that specific performance should be considered before resorting to monetary compensation where that remedy is legally available.

This doctrine does not automatically convert every informal business understanding into an NDA. It becomes relevant when the parties used a written or apparent arrangement to conceal their actual agreement and the evidence sufficiently establishes the agreement they truly intended.

What Remedies May Be Available?

Depending on the evidence and the legal theory, a party may seek injunctive relief, damages, accounting, restitution, specific performance, or other appropriate remedies. The remedy should correspond to the legal wrong proved.

For example, an injunction may be more useful than damages when disclosure is threatened but has not yet occurred. An accounting may be appropriate when a partner allegedly earned profits from using partnership information. Damages may be sought when the claimant can prove actual loss, bad faith, or another legally recognized basis for recovery.

A claimant should avoid relying exclusively on the label “trade secret.” The complaint or demand should identify the information, explain why it was confidential, describe the agreed restriction, specify the disclosure or use, and connect the conduct to the injury suffered.

Common Defenses to a Verbal NDA Claim

The recipient may argue that no agreement existed, that the information was publicly known, that the information was independently developed, or that the disclosure was authorized. The recipient may also contend that the alleged restriction was too vague to enforce.

Another defense is that the information consisted only of an opinion, general business knowledge, or an idea that was not sufficiently developed or proprietary. Under Article 1341 of the Civil Code, an opinion is not fraud merely because it later proves inaccurate, unless the circumstances involving expertise and reliance are present.

The recipient may also argue that the claimant failed to take reasonable measures to maintain secrecy. This defense is significant because a claimant cannot ordinarily demand exclusive protection for information that was intentionally placed in the public domain.

Practical Steps for Unmarried Co-Founders

Although an oral NDA may be enforceable, a written agreement is substantially safer. Co-founders should sign a confidentiality agreement before exchanging sensitive information or beginning substantial joint operations.

The agreement should identify the protected information, permitted business purposes, prohibited conduct, duration of confidentiality, ownership of work product, treatment of information after separation, authorized disclosures, remedies, and dispute-resolution procedures.

The parties should also maintain operational safeguards. These may include separate user accounts, access logs, password controls, confidentiality markings, secure document storage, employee undertakings, and written records of disclosures.

If a dispute has already arisen, the parties should preserve messages, files, access records, financial records, meeting notes, and evidence of the information’s commercial value. A lawyer should assess whether the facts support a claim based on contract, partnership duties, fraud, unjust enrichment, damages, or protection of confidential business information.

Conclusion

A verbal non-disclosure agreement between unmarried business partners is not automatically unenforceable under Philippine law. The decisive issues are consent, identifiable confidential information, the existence and scope of the confidentiality duty, breach, and legally provable injury.

Enforcement becomes difficult when the parties cannot establish what was agreed or when the information was not treated as secret. The strongest protection is a written NDA supported by consistent confidentiality practices. Where no written agreement exists, contemporaneous communications, restricted access, business records, and proof of commercial secrecy may determine whether the claim succeeds.

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