Should I Sign an NDA (Non-Disclosure Agreement)?

Have you ever heard of an NDA? Most people hear about it for the first time when they get a job πŸ‘¨β€πŸ’Ό or get into any confidential business arrangement. There are many agreements in contract law that most people are not familiar with, and this is just one of them. However, many employers insist on this hallmark of a business confidential relationship.

Is it a good idea to sign an NDA and agree to keep your lips sealed? Don’t worry; we’ve got your back! In this article, we’ll familiarize you with the NDA (non-disclosure agreement), its uses, how it is formulated, and what it contains πŸ“‘ so you can make an informed decision.Β 

What Is an NDA?

Imagine joining an organization or finding yourself in a contractual setting where you learned some private information 🀨. Would it surprise you if, going through the employment agreement, you noticed a non-disclosure agreement πŸ“‘ in the fine print? Probably not.Β 

A non-disclosure agreement (NDA), also commonly referred to as a confidentiality agreement or secrecy agreement, is a type of legally binding contract document. You can use this legal agreement in a contractual relationship to establish their confidential nature. It can:

  • Protect parties from losing important business assets
  • Prevent unauthorized disclosure and theft of trade secrets
  • Secure intellectual property according to patent law

How an NDA Works

NDAs are common in joint ventures, business deals, and contract negotiations with a potential investor or joint ventures. They protect πŸ’ͺ all the confidential material or information shared in such business or contract dealings, thereby protecting all parties involved. Nondisclosure provisions make it such that the nondisclosure restrictions may go on for a particular period of time or for an indefinite period depending on the terms of the agreement.

By signing this agreement ✍️, all the parties involved agree not to make any sensitive information public knowledge. They also agree not to tell other people that are not part of the contract. The confidential information includes:

  • Business processes
  • Any client list or mailing list
  • Details about business negotiations
  • Any business transaction
  • Any business method, business plan, business processes, or business models

Why an NDA Is Often Necessary

There is sensitive information in practically every organization. Divulging such information to unauthorized people may result in the loss of business opportunities and legal contracts for the business, thereby preventing ❌ a future relationship with the parties involved. 

For example, think of a case where two or more companies are looking to do business together. Having all parties sign a non-disclosure agreement assures them of the safety of any sensitive information they disclose in the negotiation period 🀝.

The NDA, once signed, becomes an active legal document. It forbids the involved parties from disclosing any trade secrets 🀫 or plans discussed at the time of disclosure. Breaking the NDA would serve as a breach of contract and could result in legal action. 

Here’s another example: Sheila, a business owner, is employing a new staff member πŸ§‘β€πŸ’Ό named Joe. As a part of his work, Joe will get access to confidential information. He will also learn about business practices and transactions and acquire customer lists and trade secrets.Β Therefore, Sheila will most likely require Joe to sign a non-disclosure agreement. Ultimately, this will protect the unauthorized disclosure of confidential information βœ‹.

The Three Main Types of NDA

Generally, there are three common types of a nondisclosure agreement meant to protect confidential information. They are as follows:

Unilateral NDA: Also called a one-sided agreement, unilateral NDAs are non-disclosure agreements that involve two parties (the disclosing party and the receiving party). However, only one party is disclosing sensitive information and is seeking to protect the information.

Bilateral NDA: Some people refer to this as a mutual NDA. This mutual agreement type is different from a one-sided agreement. This is because both parties are disclosing and seeking 🧐 the protection of sensitive information. Confidential information often comes up in the course of their business relationship.

Multilateral NDA: Multilateral NDAs involve more than two parties (usually three or more). Of these parties involved, at least one of them discloses sensitive subject matter. Furthermore, they want such information protected from unauthorized people. Therefore, a multilateral agreement creates legal obligations to protect the interest of all the parties involved. This is in contrast to a unilateral or bilateral agreement.

What Elements Should an NDA Contain?

You can design a non-disclosure agreement or confidential disclosure agreement to best suit the interests of the parties involved. However, there are some important elements or clauses that are universal. A comprehensive NDA business form should possess these to ensure full enforceability:

  • Names of the parties involved
  • Confidential information definition
  • The time period of confidentiality and term of the agreement
  • Outline of the appropriate usage and permissible disclosure of such confidential information
  • Exceptions or common exclusions from confidential information
  • Return of the confidential information, if appropriate
  • Arbitration and remedies in the event of a breach of agreement terms
  • The laws that govern the binding agreement and their jurisdiction

Failure to include some of these details may render the agreement invalid 🚫. Of course, you may also choose to include other material. This can include:

  • Additional steps πŸ‘£for arbitration
  • Subsequent rights
  • Additional requirements or additional questions
  • Alternative approaches
  • Agreement requests

Finally, you can include other tangible materials you deem fit to foster an applicable business relationship.

Obtain a Comprehensive NDA Template

Now that you’re familiar with non-disclosure agreements 😊, we’re certain you’re ready to make one πŸ‘Œ. However, if you need to create an NDA, you have to ensure you make no mistakes or leave anything out of your non-disclosure agreement. But how can you do this? Get a comprehensive custom-drafted NDA template from Ian Corzine today at an affordable cost!

We remain dedicated to the protection of our clients and their brands and would love to help you! Reach out to us today 😊!