Non-disclosure or confidentiality agreements (also commonly known as NDAs) are frequently used when creditors, investors, partners, suppliers, or vendors of a business must have access to sensitive information or proprietary knowledge. NDAs guard against the financial loss that could come with unauthorized use or disclosure of the information.
Situations Where NDAs Might Be Needed
NDAs are used in a variety of situations, including:
- Sales and marketing strategies
- Operation or process details
- Schematics of products
- Plans for a company’s new product
- Patent applications
- Use of specific software or technology
- Need for freelancers to complete special projects
- Need to plan for starting or expanding a business
An NDA can cover confidential information shared by one party or by both parties, depending on the situation.
Elements of a Non-Disclosure Agreement
An NDA must include the following key elements to be considered valid and enforceable in a court of law:
Duration of the agreement.
Confidential information isn’t protected indefinitely. Typically, NDAs are written to cover a period of two to five years.
Definition and description of the confidential information.
An effective NDA should describe the confidential information as accurately and completely as possible while still using non-confidential terms. If the definition and description are too vague, the agreement may not hold up in court.
Information that is in the public domain or information the receiving party already knows, should be excluded from the NDA since the recipient has no legal obligation to protect such information.
Obligations of confidentiality.
An NDA typically includes the obligation to avoid breaching the confidential relationship, encouraging others to breach it, or persuading others to acquire the confidential information covered by the NDA.
Consequences for violating the agreement.
An NDA should clearly state the consequences of breaching the agreement—such as financial compensation for the resulting damages.
Related miscellaneous provisions.
Depending on the situation, this might include details such as compliance with applicable state laws or who pays attorney fees in the event of a dispute.
Working with an experienced business attorney is the best way to ensure that your NDA provides the necessary protection for your confidential information.
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