A Non-Disclosure Agreement is a contract used to set forth an agreement to keep the discretion of all confidential information discussed and disclosed between two or more parties, whether individuals or companies.
A Non-Disclosure Agreement helps parties determine the terms and conditions in terms of handling confidential information. It also prescribes protective measures in case a party violates the contract.
All information deemed as sensitive and may cause substantial damage to either party when leaked is considered confidential. By signing a Non-Disclosure Agreement, they seal and establish a confidential relationship. Their agreement, including the confidential information shared, must not be made available to third parties. If one of them violates the contract, the other has the right to file a lawsuit.
A Non-Disclosure Agreement is also known as Confidentiality Agreement, Confidential Disclosure Agreement, Proprietary Information Agreement, Secrecy Agreement, and Non-Disparagement Agreement.
"Receiving Party" refers to the person or organization receiving the confidential information.
"Disclosing Party" refers to the person or organization that owns the confidential information.
This agreement is made and entered by and between and
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Protect Confidential Information owned by
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and the Receiving Party
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1. Keep all information provided relating to business, marketing plans, discussions, research, design, and any related programs and processes under development in strict confidence.
This term states that by signing the Non-Disclosure Agreement, the disclosing party and the receiving party recognize all business-related information as confidential information, and agree to keep them in strict confidence.
2. Disclose this information only to individuals who have signed a Non-Disclosure Agreement.
This term states that all confidential information must only be disclosed to the parties who have signed the Non-Disclosure Agreement.
3. This Agreement shall be in effect for from the date of the last disclosure of Confidential and Proprietary Information, at which time it will terminate.
Enter the effective period of the Non-Disclosure Agreement.
This term states that the confidentiality of confidential information lasts until the given period.
Executed as of
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Printed Name & Signature
Enter the printed name and the signature of the disclosing party.
Enter the address of the disclosing party.
Printed Name & Signature
Enter the printed name and the signature of the receiving party.
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Is a Non-Disclosure Agreement legally binding?
A Non-Disclosure Agreement is legally binding when signed by the parties involved in the agreement. In case of a breach of contract, it can be used to enforce lawsuits or other criminal offenses against the breaching party.
However, the enforceability of a Non-Disclosure Agreement also depends on its terms or clauses. If it does not consist or spell out important elements, there may be conflict in comprehending the regulations and limitations of the agreement.
What to include in a Non-Disclosure Agreement?
The following are the key elements that must be included in a Non-Disclosure Agreement:
- Names. The names of the parties who are involved in the agreement must be included. It must also specify who the disclosing party and the receiving party are to recognize the legal owner of the confidential information.
- Confidential Information. The disclosing party must define what passes as confidential information to make sure the receiving party understands his or her responsibilities. Defining confidential information helps establish rules and considerations of the contract with regard to disclosure.
- Reasons for Disclosure. The reason for disclosure pertains to the primary purpose of the confidential information. Stipulating it will help all parties determine its proper use.
- Exclusions. Not all information disclosed during negotiations merits secrecy. Some are exclusions, including all data collected before the agreement or other information considered as common knowledge. Defining exclusions in a Non-Disclosure Agreement helps address situations when it would be unfair for the receiving party to keep the information confidential.
- Time. Time includes the timeframe a Non-Disclosure Agreement is effective. It must also include the date it was executed and signed.
- Signature. A Non-Disclosure Agreement must contain the signatures of all the parties involved in the agreement. A signature seals any written agreement. If incomplete, the agreement or contract is null and void.
There are additional terms that a Non-Disclosure Agreement may have, such as the remedies for breach of contract and governing laws.
What are the types of a Non-Disclosure Agreement?
A Non-Disclosure Agreement has three types — Unilateral, Bilateral, and Multilateral.
- Unilateral Non-Disclosure Agreement. If a Non-Disclosure Agreement is unilateral, it means that only one party discloses confidential information.
- Bilateral Non-Disclosure Agreement. A Bilateral or Mutual Non-Disclosure Agreement is a contract between two parties who both disclose confidential information.
- Multilateral Non-Disclosure Agreement. A Multilateral Non-Disclosure Agreement is a contract that involves three or more parties with one or more disclosing parties.
What is the purpose of a Non-Disclosure Agreement?
A Non-Disclosure Agreement helps two or more individuals or companies working together establish a confidential relationship where all sensitive information shared during their transaction is secured and protected. It helps them identify and define confidential information and set procedures for its protection, management, access, or confidentiality. It serves as a legal framework that binds them to certain obligations.
Sharing sensitive or confidential information exposes the disclosing party to potential intellectual property theft or losses. It may also undermine his or her business or credibility. A Non-Disclosure Agreement helps the disclosing party entrust confidential information because he or she can seek legal redress through a civil lawsuit if the contract is violated.
The receiving party must keep all confidential information discreet and seek written consent from the disclosing party to disclose them. A Non-Disclosure Agreement is legally binding. Thus, the interest of both parties is protected depending on the terms and conditions of their contract. They may use it as legal evidence to raise disputes in court or enforce legal proceedings.
Can you be sued for breaking a non-disclosure agreement?
A party can be sued for breaking a non-disclosure agreement.
When a party signs an NDA, they can be held accountable for breaking it when it comes to disclosing information of a sensitive nature. It is their responsibility to maintain their confidentiality so as to not violate the NDA.
The party who has broken an NDA can be sued for breach of contract and have to pay damages for any loss incurred as a result of the disclosure. This applies regardless of intent.
The amount of the damages will be determined by a judge and may include compensation for:
- any actual loss caused, or likely to be caused;
- additional and direct loss (e.g. if there was a cost associated with defending/protecting the confidential information); and
- any additional consequential loss (e.g. if the loss of confidentiality would mean that there is less trust in a company when doing business, which may lead to potential business opportunities being lost).
How long should NDA last?
The validity or how long a non-disclosure agreement should last depends on the agreement that is entered into by the parties. In general, non-disclosure agreements that last indefinitely are most common with regard to employees of a company and with confidentiality clauses for business transactions. Moreover, they are most common when used in business and scientific or medical contexts. The Hollywood entertainment industry also often uses non-disclosure agreements that last for a limited period of time and it is not unusual to include provisions for renewal of such an agreement at the end thereof.
In addition, the duration of a non-disclosure agreement can depend on whether it is a sole non-disclosure agreement (SNA) or a shared non-disclosure agreement (SNDA). While SNAs last until the information shared under the agreement has become common knowledge and no longer qualifies as "confidential", SNDAs terminate when any of the parties involved decides to end it. The duration of an agreement can also be limited to a certain period of time or certain events, such as the duration of a meeting, the life cycle of a product, or other facts.
In some cases, it can be useful to include provisions in an agreement that allow for termination and/or suspension of such an agreement if certain facts occur. This should always be allowed when selling or buying a company. With regard to the termination and/or suspension of an NDA, it can be important to include provisions that allow for such termination and/or suspension when certain facts occur (e.g., non-performance of one or more parties). However, this should be done with great care and only in exceptional circumstances as people may assume that access to information is no longer restricted if the agreement has been terminated or suspended.
Can I tell my spouse about NDA?
You should not and cannot disclose information about an NDA even to your spouse unless there are provisions in an NDA that provide for disclosure to a spouse. The reason for this is that when you sign an NDA, you are committing to keeping the information discussed in the context of the NDA confidential and usually in writing. If you disclose confidential information in violation of your NDA, there could be negative consequences such as a court holding that you breached the agreement which may mean that you will have to pay financial damages to the other party and could also subject you to possible criminal prosecution.
Even if there is an NDA that allows for disclosure of confidential information, you should still be aware that anything disclosed during the marriage or even after a divorce can lead to issues related to spousal privilege which means that any declarations made by one spouse against another may not be admissible in court if they were made during the marriage or within a certain period of time after divorce.
The only exception would be when the spouse and NDA do not contain language that disfavors disclosure to a third party – such as your spouse – and there is an exception allowing for such disclosure. The federal government has also concluded that it is not allowable to disclose information covered by an NDA even to criminal investigators unless you have had all rights waived making you an unindicted co-conspirator.
What are the key elements of a non-disclosure agreement?
For a non-disclosure agreement to be comprehensive and effective, it must have the following key elements:
Parties to the Agreement
The parties (or other entities) should be specifically identified in the agreement. This makes it easier for others to determine the type of information that may or may not be shared between them. The specific identification will help limit what is protected, thereby avoiding any confusion on either side about what confidentiality obligation exists.
Subject Matter of Confidentiality
It's very important for an NDA to specify exactly what information needs to be protected by each party and for how long that protection must last. A vague secrecy provision will only create unnecessary problems because it does not specify exactly what information needs safeguarding and therefore who can use which information at which time. This has made many NDAs unenforceable because courts have declined to protect information that was too vague.
Duration of the Agreement
NDAs usually have a limited duration or period because it's expected that they will be implemented for a specific project, time period, or even until a certain event occurs – such as the disclosure of information during business negotiations. In most cases, an NDA is not intended to last for perpetuity because this could limit the parties from fully doing their jobs and using shared information to further their goals/interests. It can also become difficult to monitor compliance once covenants have been in place for long periods of time.
Monetary Penalty Clause
This clause defines what happens if confidentiality obligations are breached, including how much money should be payable as a financial penalty. It's best to include a monetary penalty clause in the NDA because it helps one party (usually an organization) recoup damages if their trade secrets are used inappropriately and they can't get relief through injunctive measures.
Signature of the Parties
It is advisable that all NDAs should be signed by both parties; this should take place before any confidential information is shared between them. An unsigned NDA should not be considered valid, nor will it provide any legal protection for either party involved. However, the agreement itself does not need to stipulate where or how it must be signed; these details can often be worked out after signing has taken place and confidentiality obligations have been established. As long as all elements of an NDA are present, the location and method of signing should not be an issue.
There are other details that may be appropriate depending on your business or personal situation, but these are some important points to consider when negotiating an NDA. It's worth noting that even though an NDA establishes confidential information between two parties, there is nothing legally binding about it. If it is breached, the only recourse an individual might have would be to sue for damages relating to the loss of money or property.
What is the difference between an NDA and a confidentiality agreement?
An NDA and a confidentiality agreement are two similar documents; however, the confidentiality agreement is an updated version of the NDA. It includes more legal protection for both parties in case of a breach of the data.
Both documents include confidentiality provisions prohibiting disclosure, unauthorized use, or copying of information belonging to or relating to each party. Both contain remedies for breaches and allow the sharing of information under a non-disclosure agreement between two parties with a third party if there is a legitimate interest in doing so. Finally, both require that any disputes must be settled before an appropriate court according to the applicable law. However, there are differences between them:
The confidentiality clause contains stronger language than an NDA does about how long it must remain confidential and what obligations each party has upon signing it. In addition, many confidentiality agreements have specific provisions about the security of information. An NDA does not have these types of provisions, because it deals with less sensitive information that is usually disclosed between start-up companies and their potential investors; whereas confidentiality agreements provide for more robust protection when dealing with competitive data or trade secrets about a company's business strategies and practices.
The confidentiality agreement usually takes precedence over the NDA in case there is a conflict between its terms and those of an NDA. For example, if one party signs both documents, but wants to disclose confidential information under the terms of the confidentiality agreement rather than those in an existing NDA, they can do so without violating either agreement as long as they inform the other party in writing before disclosing such information.
Many confidentiality agreements also state that, in the event of a breach of the agreement, the non-breaching party will have access to all appropriate legal remedies. In other words, if one party breaches its confidentiality obligations, it can be sued for damages. The NDA does not include this type of provision because it is only a tool used between start-ups and their investors or potential business partners. In other cases, where lawsuits are expected to arise from a breach of an NDA, companies usually negotiate a separate amendment about rights after a breach so they do not have to go through court procedures every time they want specific legal protections.
In addition to differences in language and content about what specific information is confidential and how long confidentiality will be maintained, the confidentiality agreement usually has an expiration date whereas the NDA does not. You can renew your non-disclosure agreement at any time; most companies choose to do this yearly or every six months unless there are specific reasons not to.
Once you sign either document, both parties must abide by its terms and conditions. This means that if you disclose information without abiding by the agreements in place (i.e.: signing an NDA), you could face harsh penalties for breaching them, including having legal action taken against you for damages resulting from your actions.
Should a non-disclosure agreement be notarized?
A nondisclosure agreement is not required to be notarized. It only needs to be signed by the parties involved.
What must an NDA contain?
A nondisclosure agreement should include the following information:
- The date and location of the signing
- The names and addresses of the parties involved in the agreement
- A full recital of all facts pertinent to the transactions or occurrences involved, not merely a statement that such facts exist. This part has to be very specific; otherwise, it is not valid if there are other documents that show these materials have been presented before agreeing on this document. In other words, if there's a confidentiality disclosure already signed by both parties during negotiations but was not attached in the final NDA, then it won't work out because, from a legal standpoint, you cannot contract what you already knew about.
- A good faith clause that states the parties involved have no knowledge of any prior disclosure of the information presented, as well as an assumption that these materials will be kept confidential.
- Each party's agreement not to disclose any part of the material without the other party's written permission. In addition, each party agrees to take all possible steps to prevent the disclosure or use of the information except with written permission by both parties. It goes without saying that this can't be a one-way agreement that allows only one company access and use of your idea for a period of time during development and production before asking for more money from them before they market it.
- A description of the information itself, which should include how it is to be kept confidential and why it is so important that all characters in the agreement have a reason for being there.
- An orderly termination of the agreement by either party in case of breach or malfeasance.
- An "entire understanding" clause that states the parties involved have read and understood everything in the document before signing it, including any appendices.
What happens when a nondisclosure expires?
When a non-disclosure expires, it means that information that was previously kept secret can be revealed without penalty. This can apply to scientific research, trade secrets, or other kinds of intellectual property.
What is the difference between a non-disclosure agreement and an employee confidentiality agreement?
A non-disclosure agreement and an employee confidentiality agreement are two similar documents with very specific differences.
While both documents seek to provide protection for an individual, business, or organization from any impending damage resulting from unauthorized disclosure of information, they are not interchangeable. The main difference between these two legal contracts is that an NDA will usually deal with issues such as infringement on patents or distribution of trade secrets while an employee confidentiality agreement focuses more on private information regarding the company and its employees rather than one specific detail. This difference can be especially important when dealing with individuals who work within highly sensitive fields such as medicine and technology (the companies that will typically use NDAs). An example of an NDA is when a company deals with software development. This may not be the only type of information that the business deals with; however, it could certainly lead to many problems if someone outside of the company were to obtain any information regarding programming code or plans for new software.
An employee confidentiality agreement will typically involve more than just intellectual property protection. It also covers trade secrets, restricting former employees from working for competitors, encouraging customers to keep specifics about their services private, and protecting other kinds of sensitive information. The following are some examples you might find in an employee confidentiality agreement:
- Payments given to employees
- Employee salary history
- Pending patent applications
NDAs often address things such as ownership of ideas or information, whereas confidentiality agreements are often used when disclosing private information to investors, suppliers, new employees, etc. NDAs are not allowed in some states under the Uniform Trade Secrets Act (UTSA), which is a law that promotes uniform legal rules regarding trade secrets. In addition, keep in mind that court rulings have stated that certain information cannot be made confidential just because the owner says so. The following criteria must be met for it to qualify as a trade secret:
- The business gains value from keeping the information a secret
- It has taken measures to maintain secrecy
- The owner limits access to knowledge
One difference between these two documents can really affect how a company handles the issue of trade secrets. A trade secret is a piece of information that gives a business a competitive advantage and securing it through a confidentiality agreement may be necessary for some businesses. An NDA cannot provide this type of protection for trade secrets because it does not contain specific language regarding things like secrecy, use of discretion, nondisclosure, or any other phrases addressing private information.
However, if you are dealing with intellectual property (IP) issues such as patents or new product releases, then an NDA will typically be used; whereas, if you are dealing with confidential matters regarding employees (such as salaries), customer information (restricting former clients from working for competitors), or general private facts about your company's inner workings (Pending patent applications, etc.), then a confidentiality agreement would be the document to use.