A non-disclosure agreement, also referred to as a confidentiality agreement, is a legal contract between at least two parties that outlines confidential material, knowledge, or information the parties intend to share among each other. Non-disclosure agreements (NDAs) require such parties not to disclose information covered by the agreement to third-parties. NDAs are commonly signed between two companies, people, or other entities that intend to do business together.
NDAs are fairly common in business. Using an NDA means your sensitive business information (ex – trade secrets) will be protected and in the event it is not, you can sue the party that breaches the agreement.
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You may want to consider using an NDA under the following situations:
- Presenting a business idea to a potential partner or investor
- Sharing financial information with a prospective business buyer or investor
- Releasing a new business product or development to a buyer or investor
- Sharing sensitive business information with a consultant or investor
- Allowing employees access to confidential business information while working
Contact us if you are considering using an NDA to protect your sensitive business information. We can draft an NDA that protects your business interests.
The Four Types of Non-Disclosure Agreements
Four common types of NDAs include the following:
- Standard Non-Disclosure Agreement. A standard NDA should be used if you are looking for a comprehensive agreement that can be applied to a wide variety of circumstances.
- Inventor Non-Disclosure Agreement. An inventor NDA can help protect an unpatented invention. This type of agreement will allow you to discuss your invention with another business or investor.
- Employee Non-Disclosure Agreement. An employee NDA is used to notify company employees that they must refrain from discussing confidential information outside of work. Employees who breach this type of NDA could face employment termination and civil penalties.
- Interview Non-Disclosure Agreement. Use an interview NDA if you intend to disclose sensitive company information to prospective applicants.
Key Elements of a Non-Disclosure Agreement
Key elements of a NDA include the following:
- Identify all parties involved including their agents
- Clearly define the confidential information
- Define the scope of the confidentiality obligation by the receiving party
- Address the term of the agreement
- Define what information is excluded from the NDA
- Define the obligations and duties of the parties receiving the information
Almost every NDA contains exclusions from the definition of confidential. This means the party receiving the excluded information has no legal duty to protect the confidentiality excluded. Most exclusions are created under California laws. One common exclusion is that information cannot be excluded by a receiving party if it was received before, or independent of, any involvement with the disclosing party.
Before you sign an NDA, make sure you review and understand the confidential information you are not to disclose. Review the liquidated damages and the consequences of breaching the agreement.