Non-Disclosure Agreement

What is a non-disclosure agreement?

A non-disclosure agreement (NDA), also known as a confidentiality agreement, is a legally binding contract between two or more parties that establishes a confidential relationship and restricts the sharing of specific information with unauthorized third parties. NDAs are commonly used in business settings to protect sensitive information such as trade secrets, business plans, client lists, proprietary technology, and other confidential data.

When to use a non-disclosure agreement

The primary purpose of an NDA is to ensure that confidential information shared between parties, such as during business negotiations, employment, or collaborations, remains protected from unauthorized disclosure or use. However, there are legal limitations. NDAs cannot be used to conceal illegal activities, and certain statutes (such as those related to whistle-blower protections or public policy) may limit their enforceability. 

There are two commonly used types of NDAs:

• Unilateral NDA: requires a single party to keep information confidential
• Mutual NDA: sometimes referred to as a bilateral NDA, it requires both parties of the agreement to keep information confidential

Non-disclosure agreement guide

Note that this help guide refers to two main parties: the disclosing party and the recipient of the confidential information. Depending upon the type of confidentiality agreement you create, these parties may instead be called the employer and employee or the employer and contractor.

Confidentiality

This agreement uses a comprehensive definition of "confidential information" and "trade secrets" to ensure any and all proprietary information remains well protected. The recipient is required to exercise the utmost diligence and his or her best efforts to guard and protect against unauthorized disclosure or theft of confidential information and trade secrets. If the recipient learns that someone else is making unauthorized disclosures, the recipient is required to notify the disclosing party.

Specific Confidential Information and Trade Secrets Protected

You have the option to specify the specific information that the contractor is required to keep confidential. This basically allows you to add your own classes of confidential information to the general definition included in the agreement. Including this information here may help clarify the expectations of the parties and support them should there ever be a dispute. Be sure to review the definitions of "confidential information" and "trade secrets" first to see whether they cover your needs.

Agreement Length

The recipient's duty of confidentiality can last as long as is needed for the parties' business purposes. Depending on the circumstances, the parties may agree on a length as short as a few months or may agree to make the duty last forever. It is best practice to limit the duration to as short as is necessary to protect the disclosing party's interests.

Disclaimer of Warranties

Most of the time it is a good idea to disclaim all warranties as to the confidential information and trade secrets. The main instance that you would not disclaim warranties is if the disclosing party has made express promises to the contractor that the information is correct and how the information will be used.

Dispute Resolution

It is usually recommended that you include a mediation and/or arbitration provision. This will require disputes to be settled through mediation or binding arbitration and avoid the time and expense of going through the formal court system.

Next, you will indicate which state's laws will govern the agreement. Usually, the disclosing party lists its principal place of business or residence as the governing state. Other options would be to use the disclosing party's state of incorporation or the state where the two parties are conducting any business together.

Additional Terms

You can add additional terms and conditions as desired. This allows you complete flexibility to tailor the document to reflect the specific situation and true intent of the parties, but be sure to preview the agreement first so that you know what has already been included.

Executing Your Agreement

• Have all parties sign and date the signature lines where indicated. Electronic signatures are allowed by the terms of the agreement. The parties can also sign copies sent to each other by email, fax, or other electronic means. If you include an arbitration provision, make sure that each party signs the arbitration exhibit.
• Notarization, if required, may be completed in person or through remote online notarization services.
• Make sure that all parties get a copy of the fully executed agreement.
• That's it! You can now rest assured that the disclosing party's confidential information will remain safe and secure.