What is a Non-disclosure agreement?

A non-disclosure agreement is an agreement that protects the company’s confidential information related to business to avoid any impact on the business in the future. Many companies enter into a business by signing the non-disclosure agreement to avoid the spread of the business secrets. Thus, the main aim of the agreement is to secure the trade secrets and other confidential information of the organization.

A legal document that protects your confidential information is a non-disclosure agreement and it is a unique agreement in which one party agrees not to disclose the confidential information of the other party. A non-disclosure agreement (NDAs) can be broadly classified into two types such as unilateral agreements and mutual agreements.

10 Key Clauses of the Non-Disclosure Agreements:

Clause #1:

What is Confidential Information?

The information which is very important and specific to be protected from leaking out of the business is known as confidential information. This clause clearly defines what information to be secured. The business includes a lot of transactions in which maintaining the secrecy of the confidential information is not much easy with the outside world. So this clause will be explained in a more detailed format to make the clients and parties understand which information to be secured for business reasons. Such confidential information may be conversations, written notes, analysis, and documents, etc. Thus, the clause mentions the special and specific material to be the trade secrets of the business.

Clause #2:

The Parties of the agreement:

This clause mentions the name of the parties, who will have access to such confidential information for business reasons. In general, the transactions in businesses include several parties engaged such as employees, attorneys, accountants, consultants, financing sources, and other portfolio companies. This clause mentions that these parties have access to confidential information for review. There will be disclosing and the recipient parties in an agreement to review the confidential information. But sometimes, business needs the help of third party members such as a graphic designer or editor or developer, etc. such a party also need to sign the agreement.

Clause #3:

Terms of Confidentiality:

A non-disclosure agreement should include the defined timeframe of the agreement. This means the details like when does the agreement end and how long the parties of the agreement have to maintain the confidential information to be secured. There is no standard time-limit but the agreement will vary according to the situation.

Clause #4:

The permitted use of confidential information:

NDAs will clearly define the use of confidential information and also to whom the parties can share such information. Along with the use of confidential information, the purpose of sharing such data and where it can be used are also defined. This means the agreement mentions why the disclosing party has to share the information with the recipient party as the first point. But the contract defines separately about the sharing of data with the third party.

Clause #5:

The Legal Obligation to Disclose:

Under certain circumstances, the recipient party might be legally forced to disclose confidential information. In such a situation, they disclose the data legally to a government agency, court or lawyers. To protect the disclosing and recipient parties in a critical situation, the agreement should include the clause mentioning that there is a right for the parties to disclose the information under legal conditions only.

Clause #6:

The Return of the Information:

While terminating the agreement, the recipient party should return the confidential information to the disclosing party or both parties can destroy the secrets as well. So the agreement should clearly define this clause by mentioning when and how this return or destruction of the information should occur. This may vary based on the circumstances of the relationship between parties. With the technology advancements, it is difficult to erase or return all information that is shared electronically. This clause enforces the recipient party to return or delete the information to the disclosing party. Sometimes the clause includes verbiage to prevent the recipient party from sharing the confidential information especially when it is difficult to erase the data.

Clause #7:

The Jurisdiction:

There will be a chance of breach or dispute between parties when they enter into the business. To manage such disputes or breach of the agreement, the agreement should include the clause mentioning which court will have jurisdiction to take care of the issues between the parties.

Clause #8:

Remedy:

Based on the above clause, the agreement should include another clause that defines some acceptable remedies in case of a breach of the agreement happens from the recipient side. It is difficult to calculate the cost of a breach and it is better to go with the mutual agreement to manage the disputes in the future.

Clause #9:

Responsibility for Legal Fees:

When the business people sign and agree with the contract, there may be a situation where one has to appoint an attorney for assisting the parties. So this clause focuses on the fact that the parties have to take care of the legal fees themselves regardless of the outcome. Thus both the disclosing and recipient parties are responsible for their attorney’s fees.

Clause #10:

The No Binding:

A non-disclosure agreement stays incomplete without this non-binding clause. Since there is no assurance for developing a good understanding between the disclosing and the recipient parties, the agreement should include the clause of non-binding. This clause allows the parties to end the agreement in any situation because of disputes. So, signing this non-disclosure agreement doesn’t mean that the parties will remain in a permanent relationship. But to terminate the agreement, the party should step into legal procedures based on law.

Proper use of non-disclosure agreements benefits the business in securing the confidential information and trade secrets and thus, creating a unique aspect to develop your business. Finally, non-disclosure agreements should be clear and well-written with the help of an attorney that provides a better understanding of the parties involved in the agreement.