These two terms are very important when you’re signing a contract, and it’s crucial to understand what they mean before you sign them.
A confidentiality agreement is a legally binding document that protects sensitive information, confidential material, or any information that the parties would not like third-parties to know. A Non-Disclosure Agreement is the same thing. The parties are entering into a contract agreeing that they will not disclose any of the information in the written contract. You can download a confidentiality agreement template or a NDA template from LawDepot.
Who Needs a Non-Disclosure Agreement?
These agreements are commonly used by companies, stopping their partners from sharing their proprietary information to other businesses if something doesn’t work out. The idea is to secure business ideas, and stop the other party from stealing these ideas as their own. This is also a good idea when giving a presentation of a business idea, new invention, new product or new technology to potential investors or partners.
Confidentiality agreements are also signed by employees of a business that are using or have knowledge of something proprietary, such as a specific recipe. In certain restaurant chains, these signature recipes would need to be kept confidential, and cooks sign an NDA (Non-Disclosure Agreement) upon their day of hire.
What’s Written in a Non-Disclosure Agreement?
Usually, the non-disclosure agreement contains any information that is generally not well-known, or not known at all. This also includes:
- The parties entering into the contract;
- The information that should be held to be confidential (this can include patents that haven’t been published yet, financial information, client lists, etc);
- The period of disclosure (if information is not considered confidential after one year from signing);
- What doesn’t need to be kept confidential – this is generally any information that the person already knows, is general knowledge, or anything they find out from other sources;
- Terms and conditions;
- The number of years the contract is binding;
- An explanation of what needs to be done with the information after signing the agreement;
- Asks that reasonable effort be used to keep the information confidential;
- When the information can be disclosed (such as when they’re obliging a court order);
- The jurisdiction that is governing over the contract.
Mutual and Non-Mutual Non-Disclosure Agreements
These agreements can be written up two different ways. The non-mutual agreement is one-sided in that the belief is that only one side has the potential to share information. This is the more common type of the two choices. A mutual agreement is good if both sides are planning on sharing information. It’s usually in the best interest of the company to only use the non-mutual agreement, and not provide any confidentiality that isn’t demanded by the other party.
There are some other provisions that might be included in the NDA, just to ensure that the company is protected in various ways. Much of this will depend on the company, but they’re all good items to consider adding. These include:
- Injunction – The clause should include that the disclosing party has the right to what is called injunctive relief. Injunctive relief is a legal remedy in lawsuits where instead of receiving monetary compensation, the party can ask that the person stops their actions (in this case, stop telling anyone what’s in the NDA).
- Rights of the Receiving Party – It’s important to include that even though the disclosing party is sharing this information, the other party has no right to use the ideas for themselves.
- Soliciting Employees – Some non-disclosure agreements include that the opposite party cannot hire or solicit the company’s employees for 1-2 years. This is a good idea if the person is going to be in contact with the employees often.
Drafting your Confidentiality Agreement or NDA
We always recommend hiring a lawyer or professional to draft a legal agreement, but you can also purchase a confidentiality agreement template online.