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Overview

A non-disclosure agreement is a legally binding contract that establishes a confidential relationship. The party or parties signing the agreement agree that sensitive information they may obtain will not be made available to any others. An NDA may also be referred to as a confidentiality agreement.

Non-disclosure agreements are common for businesses entering into negotiations with other businesses. They allow the parties to share sensitive information without fear that it will end up in the hands of competitors. In this case, it may be called a mutual non-disclosure agreement.

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Type of Non-Disclosure Agreement

In general, there are 3 types of non-disclosure agreements:

  • One-way or unilateral agreement:
    Here, only one party has the confidential information to be shared with another party. The party in possession is called the 'disclosing party' and the other one is named the 'receiving party'.
  • Two-way or bilateral agreement:
    Here, two parties are involved and both have the confidential information to be shared.
  • Multilateral agreement:
    Here, 3 or more parties are involved. One of them discloses sensitive or confidential information and the others promise to protect such information from further disclosures.

Benefits of Non-Disclosure Agreement

Stated below are some of benefits of Non-Disclosure Agreement:

  • Protects Business Secrets:
    An NDA is one of the most common ways to protect trade secrets and other confidential information. Consultants and agencies are usually asked to sign one to protect trade secrets.
  • Enhances Client Relationships:
    Businesses that work on third-party projects require their employees to sign NDAs, to restrict the use and disclosure of confidential information, and assure clients that their data is safe.

A Non-Disclosure Agreement Includes

A valid non-disclosure agreement should include the following key provisions:

  • The Parties:
    This section will mention if the nondisclosure agreement is a unilateral, bilateral, or multilateral one. The details of the party/parties (names, addresses, etc) involved should be mentioned in this part.
  • Term of the agreement:
    The nondisclosure agreement template must mention the date of execution of the agreement and the duration of the existence of the same. It should also mention if the rules and obligations related to disclosure of information will be applicable after the expiry of the nondisclosure agreement or not.
  • Confidential information:
    The non-disclosure agreement format must specify what information is to be kept in the 'confidential' category or to be protected.
  • Disclosure of confidentiality:
    This section of the non-disclosure agreement employee specifies the intentions for which the confidential data/information will be used. It will also specify with whom such information can be shared.
  • Dispute resolution:
    The non-disclosure agreement must mention the remedial measures the parties will resort to, to resolve disputes, if any. It will include alternative forms of dispute resolution they may choose to employ, such as arbitration.

Requirements for Non-Disclosure Agreement

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

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