Understanding Non-Disclosure Agreements (NDAs)
The NDA serves a purpose in avariety of situations. NDAs are generally required when two companies enter into discussions about doing business together but want to protect their own interests and the details of any potential deal. In this case, the language of the NDA forbids all involved from releasing information regarding any business processes or plans of the other party or parties.
Some companies also require that new employees sign an NDA If the employee has access to sensitive information about the company.
NDAs are also commonly used before discussions between a company seeking funding and potential investors. In such cases, the NDA is meant to prevent competitors from obtaining their trade secrets or business plans.
Special Considerations
In all of the above, the information that is being protected may include a marketing strategy and sales plan, potential customers, a manufacturing process, or proprietary software.
If an NDA is breached by one party, the other party may seek court action to prevent any further disclosures and may sue the offending party for monetary damages.
The Non-Mutual Agreement
This type of agreement usually applies to new employees if they have access to sensitive information about the company. In such cases, the employee is the only party signing the agreement that is prevented from sharing confidential information.
The Disclosure Agreement
Increasingly, individuals are asked to sign the opposite of a non-disclosure agreement. For example, a doctor may require a patient to sign an agreement that the patient's medical details may be shared with an insurer. This provides one party with the authority to share personal information and prevent them from being sued for doing so.
An NDA is a legally binding agreement; a violation can lead to legal penalties.
Requirements for an NDA
NDAs may be customized to any degree but there are six major elements that are considered essential:
The names of the parties to the agreement
A definition of what constitutes confidential information in this case
Any exclusions from confidentiality
A statement of the appropriate uses of the information to be revealed
The time periods involved
Miscellaneous provisions
Defining "Miscellaneous"
That last "miscellaneous" item might cover details such as the state law or laws that apply to the agreement and which party pays attorney fees in the case of a dispute.
Templates for non-disclosure agreements and samples of standard agreements are available from a number of legal websites.
