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A nondisclosure agreement — also known as an NDA, a confidential disclosure agreement, or confidentiality agreement — is a contract that prohibits individuals from sharing specific information with others unless they receive prior authorization. Nondisclosure agreements are common in business since they prevent employees from sharing sensitive information with competitors. An NDA can also prevent the release of sensitive customer or patient information and keep potentially damaging details away from the media.
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Nondisclosure agreements can be applied to a variety of situations. Some examples of information that may fall under an NDA include the following:
A unilateral nondisclosure agreement involves two parties:
In a mutual nondisclosure agreement, known as a two-way NDA, both parties are simultaneously considered to be the disclosing and receiving parties. This arrangement happens when two entities agree to an exchange of information. Each one provides confidential details to the other while both agree to keep the information private.
A nondisclosure agreement typically includes the following details:
This NON-DISCLOSURE AND NON-CIRCUMVENTION AGREEMENT (“NDA”) governs the disclosure of information by and between [BUYER] and [SELLER] (the parties being sometimes collectively referred to herein as “Parties” and individually as “Party”) and is effective on the date of the first exchange of Confidential Information between the Parties, or the date of the last signature below, whichever is earlier (the “Effective Date”).
The Parties wish to exchange information regarding the potential purchase of [ITEM BEING PURCHASED] from [SELLER] (the “Proposed Transaction”). In order for [BUYER] to properly evaluate the Proposed Transaction, it is necessary for the Parties to disclose certain information in confidence and, therefore, Parties agree as follows:
Each Party, by signature of its authorized representative below, has entered into this NDA as of the Effective Date.
An NDA agreement should clearly define information protected under a contract. The receiving party will want this definition to be as specific as possible to avoid inadvertently sharing potentially sensitive details. While you can make the definition of confidential information fairly broad, you cannot include:
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If the nondisclosure agreement lasts only for the duration of the relationship between the two parties, you will include a termination clause. This clause states that the protections offered by the nondisclosure agreement are no longer in effect upon the date of the contract's termination. Additionally, the clause will detail how one party notifies the other of termination. One may need to give notice within a certain period of time. When the termination date occurs, the NDA is no longer valid.
A survival clause will prevent the termination of the agreement. This clause states that the restrictions set forth by the NDA remain in place beyond the term of the agreement. The agreement does not necessarily leave the confidentiality in place indefinitely. A confidentiality clause typically survives for two to four years after the termination of the agreement.
A noncompetition clause prevents the receiving party from starting a competing company or taking confidential information to a direct competitor, an important inclusion in many NDAs. You should note, however, that the noncompetition clause will not prevent the receiving party from taking a job with a competitor. The nondisclosure agreement simply limits the information that the receiving party may share with a competitor.
A nonsolicitation clause stops the receiving party on the NDA from recruiting employees of your business. If you share valuable information with a potential partner or investor, the individual may want to hire employees from within your workforce by knowing that these individuals have similar knowledge that might make them especially valuable. A nonsolicitation clause will help protect your workforce from potential competitors.
Nondisclosure agreements can be used in many settings. While many are executed on behalf of a business, you might also use a nondisclosure agreement to keep your information safe if you're sharing potential ideas for an invention or showing someone your coding and design secrets.
Think ahead when you're sharing valuable information. Although you may only use the information recreationally at the time of disclosure, you will want to keep these details private if you believe you could profit from them in the future. You might choose to sell your award-winning recipe for salad dressing to a condiment manufacturer or patent your new product creation. Without a nondisclosure agreement, anyone who knows about the details of your project could build a business off of them.
Some types of nondisclosure agreements that one might execute include the following:
Besides protecting your information, an NDA ensures that the disclosing party is eligible for relief if the information is disclosed. A nondisclosure agreement typically ensures that the disclosing party can receive injunctive relief if the receiving party shares sensitive information.
An injunction is an order issued by a court that restrains someone from beginning or continuing a certain action. In the case of an NDA, the injunction will either stop the party from releasing the information at all or demand that the party ceases sharing sensitive information.
The nondisclosure agreement can also provide the disclosing party with monetary relief from the receiving party. The receiving party may be ordered to compensate the disclosing party for any losses incurred when the information was shared. If an NDA is in place, the disclosing party can sue for any information leaked either intentionally or through negligence.
A nondisclosure agreement is a valuable tool in any situation where you're sharing information that you want to keep private. Protect your intellectual property and sensitive operations information by creating a nondisclosure agreement between you and your employees or those with whom you do business.
ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.
Jared Fields is an experienced business lawyer and litigator with experience in diverse industries and practice areas. Prior to launching his own practice, he served as the chief legal officer for a group of privately-owned companies, including a real estate development group, construction companies, multiple franchisees, and a professional soccer team. As a result, he is experienced in real estate transactions, commercial agreements of varying degrees of sophistication, employment matters, and litigation, as well as general business legal advice. He was also an in-house attorney for a renewable energy company, where he was responsible for litigation, investigations, enforcement actions, and related securities filing disclosures. Mr. Fields also spent many years as a litigator in private practice, representing clients in matters ranging from securities litigation, to breach of contract, to cases involving real estate and financial services. Mr. Fields has particular experience in legal matters that may involve complex financial, accounting, valuation, and other quantitative issues.
I am a business attorney with years of experience advising individual entrepreneurs and small businesses on issues ranging from entity selection/formation to employment law compliance, to intellectual property protection and exploitation. I often act as General Counsel for my clients fulfilling the legal function as part of a team of managers. I look forward to learning more about your business and how I may be of assistance.
Ms. Ayub is an attorney licensed to practice in Texas. Before moving to the US, she has a number of years of experience in contract review, analysis and drafting. Ms. Ayub is available to help you with your legal problems, as well as filling LLC and other business entity formation documents. To know more about her practice, please visit https://ayublawfirmpllc.com/.
Craig E. Yaris is a Managing Partner at Holon Law Partners, with the experience and drive to handle all your Franchise, General Business Practice, and Mediation needs. As a former small business owner and Chief Operating Officer of a franchisor himself, Mr. Yaris is passionate about promoting business growth. He has experience handling daily operations, employee disputes, and negotiations of pertinent contracts for a franchise company with 100 locations in five states, where he organized and conducted semi- annual meetings to educate and inform franchisees of best practices for improved growth. In addition, Mr. Yaris was responsible for the preparation and filing of the UFOC (Uniform Franchise Offering Circular) in several states and is well-versed in business formation. Between his time as Franchisor and Conflict Resolution Specialist, Mr. Yaris was the Co-Founder and Chief Operating Officer of an online company whose goal was to help inform marketers and business owners of the fast-paced and ongoing changes within their specific verticals. This experience helped him hone his research and writing skills and prepared him for the cloud-based aspects of Holon Law Partners. Mr. Yaris also has extensive experience in public speaking, as he has planned and delivered several keynote addresses and educational seminars for many New York-based organizations, and as a Continuing Education Instructor for Hofstra University. Prior to joining Parlatore Law Group, Mr. Yaris worked as a Patient Advocate, and more recently, a Conflict Resolution Specialist, where he mediated and resolved disputes on behalf of patients with insurance companies. In this role, he negotiated for coverage of previously denied medications and medical procedures as well as successfully mediated disputes between individuals and business partners which would have otherwise resulted in protracted litigation. In addition, he has experience mediating employer and employee disputes as well as helping resolve family conflict. He has also studied and attended many Non-Violent Communication (NVC) workshops and strives to bring these tools and methods to all of his mediations. His variety of experiences speak to his ability to handle small business needs at all stages of business growth and development. Mr. Yaris also has experience with business growth and development, as he has worked with several small business on creating and implementing strategies for steady growth. In addition, to spending time with family, Mr. Yaris volunteers his time helping spread the message of the ACLU and he supports many local charities focused on families and children. He is admitted to practice in New York.
