A Detailed Discussion on Non-Disclosure Agreement

A non-disclosure agreement, known as NDA, is a legally binding contract that protects sensitive business information. It plays a crucial role in creating a confidential relationship between two or more parties. It generally protects non-public business information.  In this piece of writing, you will get to know the meaning, purpose, types, benefits, key elements, limitations, and so on. You will get a comprehensive guide about the agreement throughout this article.

What is a Non-Disclosure Agreements?

A non-disclosure agreement (NDA) is a legally enforceable contract for protecting sensitive business information against being shared with unauthorized parties. It means that NDA creates a confidential relationship between parties with having sensitive information and a person who will gain access to that information to prevent sharing information.

It is also considered as Confidentiality Agreements, Non-Disclosure Contracts, and Confidentiality Disclosure Agreements. It focuses on protecting sensitive data against being shared by unauthorized third parties including trade secrets, software code, business plans, and so on. Consultants and agencies work with multiple clients in the same industry to maintain legal obligations and client trust.  It is generally used while sharing sensitive information between parties.

The Purpose and Functions of a Non-Disclosure Agreement

The primary purpose of an NDA is to legally protect sensitive information to promote confidentiality and protection. An NDA forms a legal framework for protecting ideas and confidential information. Businesses need NDAs to prevent unauthorized shared information.

If any party breaks the agreement, they will face lawsuits and have to pay financial penalties and criminal charges. Moreover, it contributes a level of protection to businesses by creating a confidential relationship. It helps businesses to take legal action against unauthorized parties and protects them from breaches.

Three Important Functions of a Non-Disclosure Agreement:

• An NDA identifies sensitive information by recognizing data including trade secrets, customer lists, personal information, financial details, and so on. It clarifies which information about a business can be shared publicly. It provides a legal implication specifically for business. It establishes a confidential relationship between two parties. 
• It focuses on protecting sensitive information by creating a legal obligation to keep sensitive information private. 
• NDA serves as a legal protection for investors to protect patent rights and develop their new products or concepts. 

Types of Non-Disclosure Agreement

There are three types of NDAs:

1. One-way or Unilateral Agreement

A unilateral agreement is a one-way contract agreement, in which one party shares confidential information with another party. The party that shares the information is the disclosing party and the party who receives the information is the receiving party.

2. Two-way or Bilateral Agreement

A bilateral agreement is a binding contract between two parties. Both parties, including the disclosing and receiving party share confidential information with each other. It is considered as a mutual non-disclosure agreement in legal terms.

3. Multilateral Agreement

A multilateral agreement is a legal document between three or more parties. One party shares confidential information and other parties make promises to protect that information from sharing to others. The parties should protect the sensitive information for businesses.

Benefits of a Non-Disclosure Agreement

Here are some benefits of a Non- Disclosure Agreement:

• An NDA protects confidential information by preventing sharing from unauthorized parties. Agencies and consultants need to sign NDA to deal with trade secrets.
• Businesses with NDA work on third-party projects to protect the confidential information of clients. It helps to build trust and confidential relationships among clients. It ensures that their sensitive information is safe for confidentiality.
• NDA helps to reduce the chances of sharing secret information with others and maintains confidentiality.
• It helps to build a confidential relationship and trust between business parties
• An NDA plays a crucial role in protecting the intellectual property of businesses.
• It takes legal action against breaches and provides legal protection for sensitive information.

Non-Disclosure Agreement Format

Key Elements of Non-disclosure Agreement

Here are the key elements of an NDA:

The Parties: It signifies whether the agreement is a unilateral, bilateral, or multilateral agreement of the party or parties for confidentiality. It contains the details of the party or parties to the contract.

Term of the Agreement: Term of the Agreement means the agreement template. It should include the date of execution and the specific time frame of the agreement.  It also needs to mention whether the rules and obligations of confidential information will be applicable after the expiry of NDA.

Confidential Information: It signifies that an NDA format should have the confidential information that needs to be protected.

Disclosure of Confidentiality: This section of the agreement is the purpose of disclosure which is used for permission. It specifies how the confidential information will be used and whom to share.

Dispute Resolution: The NDA required remedial measures for parties to solve the conflicts. It contains alternative forms of dispute resolution for resolving the dispute in a business.

Three Steps to Write a Non-Disclosure Agreement

Step 1: An employee should submit their request for their specific needs to the representative. The representative will discuss and understand their needs for a non-disclosure agreement.

Step 2: In the next step, the business representative will contact them if they need more information.

Step 3: If they receive the necessary information, they will work on the request and send the format of the agreement within 3 to 4 working days for review.

Exclusions to Non-Disclosure Agreement

Some exclusions of an NDA:

• An NDA doesn’t protect confidential information legally which is already in the public domain.
• Information that is already known by the receiver of the NDA will not be included in the agreement.
• Information disclosed by the disclosing party within the context of the agreement.
• Information that has already been shared with the receiving party by a court order.

When Do You Need a NDA Agreement?

The agreement is required while sharing confidential information with anyone who is not an employee or agent. It will be useful to protect confidential information by preventing unauthorized disclosure.

There are some situations where NDA is needed:

Hiring a Consultant

An NDA is necessary for a consultant to share confidential information between a consultant and their clients for confidentiality. It helps to protect sensitive information against disclosure to third parties. It builds a confidential relationship between two parties. Consultants will be able to protect their business by using NDAs. However, NDA serves as a safeguard to protect sensitive information from being shared.

Entering Into a Joint Venture

When individuals enter a joint venture, they need an NDA to protect sensitive information from being shared between the parties. It prevents disclosure of sensitive information against competitors for business.

Negotiating a Merger or Acquisition

A non-disclosure Agreement serves as a legal protection for confidential information from being shared between the parties for merger or acquisition. It protects the confidential information during the dealing process. However, NDA will be helpful to maintain the integrity of the negotiations.

Sharing Trade Secrets or Intellectual Property

If any party wants to share trade secrets with third parties, they need to sign for an NDA. It will play a vital role in protecting trade secrets and intellectual property (IP) from being shared with others. A person will able to keep a valuable information safe by using NDA. Thus, it will be helpful to maintain confidentiality by preventing unauthorized people from sharing sensitive information.

Discussing New Product Development

An NDA is necessary for discussing a new product development for business. An NDA helps business to share information with competitors about a new product with potential partners, manufacturers, or external consultants. It also helps to discuss business ideas and contributes valuable feedback for product development. Businesses will be able to maintain a competitive edge by using NDA in the market.

Seeking Funding From Investors

A NDA agreement is useful for investors seeking funds to protect confidential information from being shared. It will also be crucial in protecting sensitive business information, including trade secrets and detailed business plans, before making a funding decision.

Requirements for a Non-Disclosure Agreement

Here are some requirements for the agreement:

Identification of the Parties: The NDA needs to identify the disclosing party and receiving party in the agreement. It includes the names and details of all parties who share and receive the information for confidentiality.

Definition of Confidential Information: Confidential information is any information about a company considered as confidential information in NDA. NDA must clearly define the types of confidential information for the Agreement.

Scope of the Agreement: An agreement of this type must define the terms of the contract including the duration of confidentiality obligation.

Exceptions of Confidentiality: Exceptions of Confidentiality: It must include the information that is already available to the public for disclosure. It will be helpful for parties to understand which information is not protected by the agreement.

Obligations of the recipient: A non-disclosure Agreement (NDA) must outline the recipient’s obligations to maintain confidentiality regarding sharing confidential information.

Remedies for Breach: It must take legal action against the breaches of the agreement. NDA needs to identify the available remedies, including injunctive relief or financial damages. 

Governing Law and Jurisdiction: The NDA must establish the governing law and jurisdiction for parties to maintain the legal standards in the event of a dispute.

NDA Agreement Template

A non-disclosure Agreement (NDA) template is a legal document that specifies the legal terms of the parties. It is a legally binding agreement between two or more parties to prevent disclosure of confidential information from being shared by unauthorized third parties.  It is also considered as the pre-written document for an NDA.

This non-disclosure Agreement states that the (‘Agreement’) is made on a specific date (Effective date) by and between the two parties (the ‘disclosing party’) and (the ‘receiving party’), within their respective business address (Address).  

Key aspects of NDA agreement template:

• Purpose

The disclosing party engaged with the creation, development, and marketing of [Product/service/Information] in a business. The disclosing party shares the confidential information with the receiving party for confidentiality.

• Confidential Information

Confidential information is sensitive information about trade secrets that is shared between two parties. This information is shared by the disclosing party and received by the receiving party through verbal or written form.

• Non-disclosure and Non-Use

The receiving party makes a promise to keep the confidential information without the prior written consent of the disclosing party for confidentiality. Both parties keep the confidentiality of sensitive information for business.

• Term and Termination

It specifies that if one of the parties provides written notice to the other party, they will terminate this NDA agreement earlier for the specified “term”. During the termination, the receiver party needs to return and destroy the confidential information. They should also provide written certification regarding sensitive information to the disclosing party.

• Remedies

Both the disclosing party and the receiving party understand that if there is a breach, the disclosing party will face irreparable harm and monetary compensation. They need an injunction remedy to prevent the disclosure of confidential information from unauthorized parties.

• Governing law and Jurisdiction

The laws of a specific country or state will govern and interpret the NDA agreement instead of the conflict of law. Any legal proceedings or action that appears from this agreement, must be conducted in the courts of the state or country. 

• Entire Agreement

Both the disclosing party and receiving party understand the subject matter of a non-disclosure Agreement (NDA).  This Agreement must be in a written format for both parties to prevent breaches. The parties will executed this agreement within the effective date with signature, as bellow:

Disclosing Party: [Name]

By: ___________________________

[Name], [Title]

Receiving Party: [Name]

By: ___________________________

[Name], [Title]

Conclusion

In this piece of writing, you received a comprehensive guide about a Non-disclosure Agreement preparation, utility and detailed format. If you want to one for your company, contact Online Legal India. They have experienced professionals to guide you. Contact them today.