NDAs and Confidentiality Agreements in Real Estate and Corporate Transactions

NDAs and Confidentiality Agreements in Real Estate and Corporate Transactions

Confidentiality agreements, known interchangeably as NDAs (Non-Disclosure Agreements) or non-disclosure agreements, constitute contractual instruments of critical use in real estate due diligence operations, mergers and acquisitions, co-investments and corporate restructurings. Their careless drafting generates costly litigation and, more frequently, leaves the parties’ most sensitive information without effective legal protection.

Applicable Legal Framework in Mexico

The legal regime of NDAs in Mexico is built on several regulatory layers. The Federal Civil Code, in its articles 1792 to 1859, regulates the general theory of contracts and establishes the validity requirements applicable to any agreement, including lawful object, consent free from defects and capacity of the parties. Article 1796 establishes the principle of binding effect of freely entered contracts, the basis upon which mandatory performance is required.

In the matter of business secrets, the Federal Law for the Protection of Industrial Property (LFPPI), published on July 1, 2020 and in force with its amendments through 2025, expressly regulates industrial secrets in articles 163 to 172. Article 163 defines an industrial secret as any information of industrial or commercial application that a person maintains in a confidential manner, which signifies obtaining or maintaining a competitive advantage. Its protection presupposes that the holder has adopted reasonable measures to maintain confidentiality, which makes the NDA key evidence of such diligence.

Article 170 of the LFPPI establishes the prohibited acts in relation to industrial secrets: the disclosure, acquisition or use of an industrial secret without the consent of the holder. These conducts may be legally classified into two distinct categories within the LFPPI itself: on the one hand, as infractions in matters of industrial property subject to administrative prosecution before the IMPI; on the other, as acts of unfair competition within the meaning of articles 229 to 232 of the same law, which constitute an autonomous regime within Chapter III of Title VII. It is important not to confuse both frameworks: the action for infraction and the action for unfair competition have distinct procedural requirements and consequences, although they may derive from the same facts.

At the criminal level, the LFPPI contains its own sanctionary provisions for crimes against industrial property in articles 223 to 228, which typify conducts that include the improper disclosure of industrial secrets and provide for penalties of imprisonment and fines. Additionally, the Federal Criminal Code contemplates in articles 210 and 211 bis the crime of disclosure of secrets, rules that may be applicable depending on the perpetrator and the specific circumstances of the disclosure. The articulation between both regulatory bodies requires an analysis of the concurrence of norms in each specific case.

For transactions with a digital component or personal databases, the Federal Law for the Protection of Personal Data Held by Private Parties (LFPDPPP) of 2010 imposes relevant obligations regarding personal information shared during due diligence processes, particularly in operations involving tenant portfolios, customer or employee records. Article 19 obligates those responsible to adopt administrative, technical and physical security measures to protect personal data. Articles 21 and 22 extend security and confidentiality obligations to those handling the data and to third parties who access data by virtue of legal relationships with the responsible party. These provisions are directly applicable to information recipients in due diligence processes when such information comprises personal data.

Essential Clauses and Scope

A technically sound NDA requires precision in the following nuclear elements:

• Definition of confidential information: must be sufficiently broad to cover financial information, projections, asset ownership, development strategies and operational data, but not so generic as to be inapplicable. Boilerplate clauses such as “all information exchanged” have been interpreted restrictively by Mexican courts, which require reasonableness in scope.
• Express exclusions: information in the public domain, legitimately obtained from third parties, or already known by the receiving party prior to the agreement. These exclusions are implicitly recognized by the Mexican legal system and their absence from the text does not eliminate them, but their express inclusion reduces litigation.
• Restricted use obligations: confidential information must be limited to the specific purpose of the transaction, with explicit prohibition of use for competitive purposes or value extraction.
• Custody duty: the NDA must impose on the receiving party a standard of care equivalent to that which applies to its own confidential information, with a reasonable minimum standard regardless of the receiver’s internal standard.
• Return or destruction of confidential information: the absence of this clause leaves strategic information in the possession of the receiver indefinitely once negotiations have ended, a situation that no disclosing party should accept. The clause must specify the applicable mechanism: physical return of documents, verifiable deletion of digital files, erasure of copies in email systems and cloud storage, and destruction of internal analyses prepared from the received information. Given the practical complexity of proving complete deletion in digital environments, it is recommended that the clause require written certification of destruction signed by an authorized representative of the receiving party within a specified period following the termination of the agreement or negotiations.

Unilateral NDA versus Bilateral NDA: A Structural Decision

A decision that is frequently made without sufficient analysis is whether the confidentiality agreement should be structured as unilateral or bilateral. In a unilateral NDA, only one party discloses confidential information and the other assumes exclusively confidentiality obligations. In a bilateral or mutual NDA, both parties simultaneously constitute themselves as disclosers and receivers, assuming reciprocal confidentiality obligations.

In early stages of a real estate or corporate transaction, the most frequent situation is asymmetric: the developer or seller shares feasibility studies, financial models, permits and property structures with a potential investor or acquirer who, at that phase, does not disclose equivalent information. Forcing a bilateral structure in that context can generate unexpected obligations for the disclosing party if the receiver, in turn, transmits information to it that it considers confidential. Furthermore, careless bilateral drafting can give rise to cross-claims over trivial or commonly accessible information.

Bilateral structure is appropriate when both parties genuinely share sensitive information from the outset, as occurs in joint ventures between developers with their own asset portfolios or in merger processes between companies of comparable size. In operations where information asymmetry is structural, the unilateral NDA protects the disclosing party with greater precision and clearly delineates who assumes what obligations. The choice between both structures should be made before drafting the instrument, not adjusted retroactively to a generic template.

Standalone NDA versus Confidentiality Clause in Letter of Intent or Term Sheet

In the practice of sophisticated M&A in Mexico, confidentiality obligations are frequently implemented not through a standalone NDA, but through a clause inserted within a letter of intent or term sheet. This practice raises a technically relevant question: when the letter of intent is expressly declared non-binding in its economic and structural terms, does that non-binding nature extend to the confidentiality clause contained in the same document?

The answer under Mexican law stems from the principle of clause autonomy implicitly recognized in article 1796 of the Federal Civil Code and in the doctrine of contractual severability. If the letter of intent expressly distinguishes between its non-binding provisions (price, structure, closing conditions) and its binding provisions (confidentiality, exclusivity, applicable law), the confidentiality clause retains full legal effect regardless of whether negotiations fail and the transaction is not perfected. Mexican commercial case law has not uniformly resolved all nuances of this question, but the general principle of obligatoriness in article 1796 supports the enforceability of commitments specifically identified as binding within a mixed instrument.

The operative recommendation is to incorporate in the letter of intent a confidentiality section drafted with the same precision as a standalone NDA, accompanied by an express statement identifying it as a binding obligation independent of the outcome of negotiations. When the transaction has a component of highly sensitive information, the preferable practice is to execute a standalone NDA before or simultaneously with the signing of the letter of intent, avoiding any ambiguity regarding separability.

Duration and Term

The determination of the term of validity is, in practice, one of the most litigious clauses. Excessively prolonged terms may be challenged as disproportionate restrictions on freedom of commerce, protected by constitutional article 5. The dominant practice in real estate transactions and M&A in Mexico ranges between two and five years counted from the date of signature or from the termination of negotiations, although information with persistent competitive value, such as market studies or proprietary financial models, may justify longer terms with wording that justifies them technically in the instrument itself.

Choice of Applicable Law in Cross-Border Transactions

In international transactions involving assets in the Riviera Maya, such as resort acquisitions, mixed-use developments or co-investments with foreign private equity funds, it is common for parties to negotiate the inclusion of a choice of law clause that subjects the NDA to a foreign legal system, typically the law of the State of New York or English law. This choice may offer advantages in terms of interpretive certainty for the foreign party, but does not operate without restrictions against the Mexican legal system.

The provisions of the LFPPI regarding trade secrets, in particular articles 163 to 172 and 223 to 228, constitute rules of public policy that apply in Mexico regardless of the law chosen by the parties to govern the contract. The same applies to constitutional protections derived from article 5 of the Political Constitution of the United Mexican States regarding freedom of work and commerce: a term or restriction that may be valid under New York law may be challengeable in Mexico if it exceeds the constitutional limits of proportionality. Consequently, the selection of foreign law does not exempt the NDA from compliance with Mexican public policy requirements when its execution or effects take place in national territory.

Conversely, parties may legitimately benefit from foreign law for aspects that do not involve mandatory Mexican rules: the interpretation of technical terms, standards of damages, and the procedural structure of international arbitration. The recommendation in cross-border operations with assets in Quintana Roo is that the choice of law clause be drafted with assistance from lawyers with simultaneous knowledge of Mexican law and the chosen system, explicitly identifying the mandatory Mexican public policy provisions that are reserved as applicable regardless of the law governing the contract.

Enforcement Mechanisms

Enforcement of an NDA in Mexico may be channeled through three concurrent avenues:

1. Ordinary civil procedure: action for specific performance or rescission with damages and losses, based on articles 1949 and 2104 of the Federal Civil Code. Quantification of damages is the main practical obstacle, which is why the inclusion of conventional penalty clauses, provided for in article 1840 of the same code, is essential. A correctly drafted penalty clause eliminates the burden of proving actual damages.
2. Industrial property procedure: before the Mexican Institute of Industrial Property (IMPI), through the action for declaration of administrative infringement for violation of trade secrets pursuant to article 214 of the LFPPI (Declaration of Administrative Infringement). This avenue allows obtaining precautionary measures for immediate cessation.
3. Arbitration: in transactions with international parties, the arbitration clause before the Center for Arbitration and Mediation of Mexico (CAM) or the International Chamber of Commerce (ICC) offers substantial advantages in terms of confidentiality of the procedure itself and recognition of the award under the New York Convention, ratified by Mexico.

The Collegiate Courts of Circuit have held, in repeated case law on commercial matters, that the admissibility of precautionary measures in the event of violation of confidentiality obligations requires establishing fumus boni iuris and periculum in mora, with the existence of the written NDA and the confidential nature of the information being the determining elements for satisfying the former of these requirements.

Operational Considerations for Transactions in Quintana Roo

In real estate operations in the Riviera Maya, NDAs acquire specific relevance during due diligence processes of trusts in restricted zones, environmental permitting and regional impact studies. Information obtained from the Public Property Registry of Quintana Roo is public in nature and is excluded from NDA coverage, but feasibility analyses, project descriptive memoranda and return on investment models shared between developer and investor are protectable confidential information. Its unauthorized disclosure to competitors has generated litigation before the District Courts in Cancún that illustrate the importance of executing the NDA before the first information exchange, not after.

Operational Conclusion

A correctly structured NDA is not a formality of file opening. It is the instrument that determines whether strategic information shared in a transaction remains or not under effective legal protection. Its drafting must anticipate litigation, not react to it. The penalty clause, the choice of forum, the precise definition of the subject matter, the information return or destruction clause and the articulation with the industrial secrets regime of the LFPPI are, together, the elements that convert a standard NDA into a procedurally functional instrument.

IBG Legal advises developers, investment funds and tourism operators on the structuring, negotiation and enforcement of confidentiality agreements in transactions with assets in Quintana Roo and the Riviera Maya. Our position in Cancún, at the geographic center of Mexico’s fastest-growing tourism real estate market, allows us to accompany from NDA signature through transaction closing or, when necessary, through to arbitration or district court. If you are considering a co-investment in tourism real estate development or a corporate acquisition with a due diligence component in Quintana Roo, contact us before initiating the first information exchange.

Sources and References

Legislation

• Federal Civil Code, articles 1792-1859, 1796, 1840, 1949, 2104. Published in the DOF on May 26, 1928; last relevant amendment published in the DOF on January 11, 2021.
• Federal Law for the Protection of Industrial Property (LFPPI), articles 163-172, 214 (Declaration of Administrative Infraction), 223-228 (Crimes against Industrial Property), 229-232 (Unfair Competition). Published in the DOF on July 1, 2020; in force with amendments through 2025.
• Federal Penal Code, articles 210 and 211 bis (disclosure of secrets). Published in the DOF on August 14, 1931; last amendment published in the DOF on January 19, 2024. Note: the specific criminal penalties for crimes against industrial property, including improper disclosure of industrial secrets, are independently classified in articles 223 through 228 of the LFPPI; articles 210 and 211 bis of the FPC apply based on the active subject and the circumstances of the conduct, in terms of a conflict of norms analysis.
• Federal Law for the Protection of Personal Data in Possession of Private Parties (LFPDPPP), articles 19, 21 and 22. Published in the DOF on July 5, 2010; last amendment published in the DOF on May 20, 2021. Article 19 establishes the general security obligation of the responsible party; articles 21 and 22 extend security and confidentiality obligations to data processors and third parties with access to personal data.
• Political Constitution of the United Mexican States, article 5 (freedom of work and commerce). Text in force with amendments published in the DOF through February 2026.
• Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention, 1958). Ratified by Mexico, published in the DOF on June 22, 1971.

Judicial Criteria

• Collegiate Courts of Circuit in commercial matters: reiterated criterion to the effect that the admissibility of precautionary measures for violation of contractual confidentiality obligations requires the establishment of fumus boni iuris through the presentation of the written agreement and the demonstration of the confidential nature of the disclosed information, as well as the periculum in mora arising from the commercial use of such information by the receiving party. To identify IUS registration numbers and references to the Federal Judicial Weekly corresponding to the specific theses applicable to the particular case, it is recommended to consult the jurisprudential search system of the SCJN available at sjf2.scjn.gob.mx, using the search terms “confidentiality”, “precautionary measures” and “fumus boni iuris” in commercial matters.
• First Chamber of the Supreme Court of Justice of the Nation: criterion held in the matter of contractual freedom to the effect that conventional penalty clauses agreed upon by parties with full capacity are valid and enforceable without the necessity of proving actual damages, provided that they are not contrary to public policy or good morals, in accordance with article 1840 of the Federal Civil Code. The IUS registration numbers and references to the Federal Judicial Weekly applicable to specific theses regarding penalty clauses and exemption from proof of damage can be located at sjf2.scjn.gob.mx under the terms “penalty clause” and “damage” in civil and commercial matters.

Doctrine

• Rojina Villegas, Rafael. Mexican Civil Law, Volume V: Obligations. Editorial Porrúa, Mexico City, updated edition.
• Rangel Medina, David. Industrial and Intellectual Property Law. UNAM, Institute of Legal Research, Mexico City.
• Ovalle Favela, José. General Theory of Process. Oxford University Press México, current edition.

Official Sources

• Federal Official Gazette (DOF): www.dof.gob.mx
• Mexican Institute of Industrial Property (IMPI): www.gob.mx/impi
• Supreme Court of Justice of the Nation, Thesis and Jurisprudence Consultation System (IUS): sjf2.scjn.gob.mx
• Arbitration and Mediation Center of Mexico (CAM): www.camex.com.mx
• Public Registry of Property of the State of Quintana Roo, Official Gazette of the State of Quintana Roo.