The growing development of information technology has led to more frequent use of non disclosure agreements. What is a non disclosure agreement or NDA? Simply put, an NDA is an agreement to prevent disclosing secrets or to commit to confidentiality and data protection. It is a necessary tool to prevent any confidential information from becoming the possession of a third party.
The application of a non disclosure agreement is quite wide. As a business you use it when in the early stages of negotiations and discussions. In this blog we talk about everything you need to know about non disclosure agreements and when is it important to put one in place.
What is a non disclosure agreement?
An NDA or confidentiality agreement is a legally enforceable contract that protects against the disclosure of confidential information. Such confidential information may include parts of data on specific knowledge, trade secrets. Or information about customers or products, strategic plans and other information that is confidential and owned exclusively by a particular company or individual and may benefit the competition. The receiving party to the NDA agrees that they will not disclose or in any way profit from the information the disclosing party shares.
When to use a non disclosure agreement?
An NDA is often a one-way, or unilateral non-disclosure agreement. You sign this when only one party discloses information.
But there are cases of a joint venture when the NDA agreement or in this case a two-way non disclosure agreement, applies to both parties.
Here are a few situations when it is important to use a non disclosure agreement:
- You are trying to sell or license a new product or technology. Any potential buyer in this situation should sign an NDA to prevent them from sharing confidential data with anyone else, especially your competitors.
- Your employees have access to sensitive data. When they sign an NDA you make sure they won’t take any ideas and confidential information with them should they decide to quit and open their own business, based on the information they obtain while working for you.
- You are presenting an offer to a potential investor. Ask any investors and potential partners to sign an NDA to prevent leaking of the information you revealed to them.
There are so many scenarios where you may require non disclosure agreements pre-negotiations. But the general rule is that you should always get a signed NDA in place before sharing any confidential information.
How do I create an NDA?
Many businesses negotiations use a generic NDA that has been downloaded from the Internet without professional adaptation. Or in some cases, the agreement has been drawn up in accordance with the law of another country and applied in a different one where it falls outside jurisdiction.
We often see examples that the model of a specific non disclosure agreement is created for another project. Or for other contracting parties and has been used for a legal transaction with which there is no similarity.
Such practices often lead to a situation where you can’t perform the contract when you need it most. Or you can’t get judicial protection in the event that confidential information falls into the wrong hands.
In complex business discussions, it is far better to get a bespoke NDA drawn up by professionals. But in some straightforward cases, use a template if you trust the source. We currently have a one-way non disclosure agreement on our website that has been drafted under the laws of England and Wales. We will also soon be adding a two-way NDA.
Signing an NDA
If anyone puts an NDA in front of you and asks you to sign it, remember that you are under no legal requirement to do so. IT is important to check the terms and understand the key elements. Such as what your obligations are and what is the duration of the confidentiality agreement. Check the terms and if you are unsure get a legal eye on the agreement. Because once you sign an NDA, there is no way around it but to pay financial penalties if you breach the terms of the NDA.
Summary
We recommend that you use non disclosure agreements before engaging in investments, negotiations and projects. Or wherever you need to present intellectual property, products, or technologies to potential business partners and investors.
If you are not sure how to create and sign a non-disclosure agreement, please don’t hesitate to contact us. We review legal documents for a fixed fee and we can provide you with an NDA agreement that will best fit your purpose.