NDA
A nondisclosure agreement—also called a non-disclosure agreement, NDA, or confidential disclosure agreement—protects business' proprietary information.
What is an NDA?
An NDA is a legal contract between two or more parties to protect confidential information from anyone not designated in the contract. An NDA can be one-sided or mutual. One-sided NDAs protect only one party's information, while mutual NDAs involve both parties agreeing to protect each other's information. Such agreements can be indefinite or include a clause that dictates its duration.
Generally, courts will enforce confidentiality agreements as long as it doesn't involve a criminal act. If a confidentiality agreement is violated, the disclosing party can face substantial legal and financial consequences, including a lawsuit.
Nondisclosure agreements or mutual NDA are common in many business scenarios that require a confidential relationship. The following are a few examples:
- Beginning work at a new company
- Signing a contract with a new client
- Negotiating a business partnership
- Creating a new product, technology, or service
- Merging companies
For a more comprehensive description on confidential relationships, check out this article on nondisclosure agreement types and uses.
FAQs
When are NDAs used?
NDAs can act as both a confidentiality and a proprietary information agreement. Essentially, businesses use them whenever they need to protect confidential information or intellectual property. For example, businesses will use an NDA when revealing a new invention to a potential investor, partner, or buyer or when hiring someone who will need access to sensitive information.
Is an NDA legally binding?
Yes, an NDA is legally binding when executed correctly and can have serious legal and financial consequences for the party who breaches the contract. That said, courts may determine an NDA is unenforceable in a criminal case. For example, certain criteria will be considered before courts will enforce an NDA in a sexual harassment case.
Do you need a lawyer to write an NDA?
You aren't required to seek legal counsel when drafting an NDA, but it's highly recommended. Without an experienced business attorney, you risk creating an agreement that's either too broad or too narrow to be enforceable. A lawyer can help you write an NDA that clearly defines confidential information and how to handle breaches.
What are the key elements of an NDA?
While businesses should customize NDAs to fit their needs and circumstances, every agreement should contain the following elements:
- The identities of all parties involved
- A clear definition of confidential information covered
- The scope of the confidentiality
- Any excluding cases
- The duration the NDA is in effect