NDA- nondisclosure agreement
One of the first things you discover in owning a business is that you cannot avoid certain types of legal documents. Nowadays the security of information, ideas and prospects can only be considered with great care. Links between business partners, plans or ideas may mark a winning or a loss.
A nondisclosure agreement (also known as NDA) is a legal contract between two or more parties that signifies a confidential relationship exists between the parties involved. The confidential relationship often refers to information that is to be shared between the parties but should not be made available to the general public.
NDAs are also commonly referred to as a confidentiality agreement (Confidential Disclosure Agreement, CDA). If basically they are the same thing, some practitioners are of the view that NDAs are used in transactional matters such as mergers and acquisitions while CDA are used in non-transactional matters such as performing services or consulting work.
NDA content
Usually the enterprises have their own draft of NDA. However, a basic non-disclosure agreement has the following content:
- The parties involved;
- The definition of what is confidential – this can be very vague for the purpose of being all-inclusive;
- The disclosure period
- The term the contract is binding
- Any exclusions from what must be kept confidential
- The obligations of the receiving party
- Any types of permissible disclosure, such as law enforcement
Bear in mind that different parts of the agreement need different care and you must pay special attention to some areas. Though NDAs may be customized to any degree, there are six major elements considered essential to include. These are sections that detail the parties to the agreement, the definition of what constitutes confidential information, the exclusions from confidential information, the obligations of the receiving party, the time periods involved and miscellaneous provisions.
Although the content of every NDA agreement is unique in a customized manner, there are two main types of standard non-disclosure agreements. They are referred to as a „unilateral NDA” and a „mutual NDA”.
A unilateral non-disclosure agreement is a contract in which one party agrees not to disclose certain information of another. Most NDA contracts fall under this umbrella. For example, if you own a business and are hiring an employee or contractor, you may ask that they keep your trade secret under wraps. Upon signing, this employee or contractor is bound by law to do so.
A mutual non-disclosure agreement, on the other hand, is when both parties agree to not share the other’s information. Commonly, mutual NDAs are signed when two businesses share protected communication.
So what’s The Point of a NDA? Briefly: to protect your information, such as business strategies, knowledge, plans for a new tool, information about clients or customers for a specific company and so on. By signing an NDA, participants promise to not divulge or release information shared with them by the other people involved. If the information is leaked, the injured person can claim breach of contract.
On a final note: NDAs are an almost surefire way to confirm that confidential information stays protected in a variety of situations.