NON-DISCLOSURE AGREEMENT

A non-disclosure agreement or NDA is a written contract between two parties (people or organisations) that prohibits the sharing of confidential information shared between both ends. 

Non-disclosure agreements are also known as confidentiality agreements, confidentiality disclosure agreements, and non-disclosure contracts. You may encounter one at the beginning of a business relationship or large financial exchange. For example, an employer or client may ask a new hire or contractor to sign a confidentiality agreement to protect the organization’s sensitive data.

Purpose of an NDA

The purpose of an NDA is to protect the information one or more parties may exchange. As long as all parties involved sign it, an NDA is a legally binding agreement that prohibits the sharing of sensitive or confidential information with external parties.

An NDA is very important and useful for the seller (disclosing party), as the seller is the one who is disclosing every piece of confidential information about the company. They face more risk from others finding out about the information, as it may not generate positive sentiments from customers and employees. For buyers, on the other hand, it is absolutely fine and normal to look for acquisitions and growth.

WHEN TO SIGN A NON-DISCLOSURE AGREEMENT

There are various events or circumstances under which an NDA shall be entered into and signed. A few of them are as follows:

• into a business deal,
• While taking an expert’s advice on a new product,
• while starting a new project,
• while investigating the possibility of investment with another party,
• while providing employment,
• Beginning a work contract with a new client
• Exploring an investment opportunity
• Negotiating a business partnership or joint venture

 NDA can be of Three types:

1. Unilateral NDA-It involves two parties but only one party discloses certain information to the other and wants to protect it from further dissemination. Unilateral NDAs, also known as one-way NDAs, only require one party to disclose its confidential information to the other party. They are the most common type of NDA, and you will come across them whenever companies need to disclose confidential information to employees, advisors, clients, partners, and other stakeholders.
2. Bilateral NDA- It is also known as Mutual NDA. It involves two parties, and both parties disclose information to each other, and both intend to protect that information from further dissemination.
3. Multilateral NDA-It involves three or more parties entering the Agreement, out of which at least one party discloses the information to other parties and intends to protect the same form from further dissemination. Instead of having two-three unilateral or bilateral NDAs one can have a single Multilateral NDA. These agreements eliminate the need for separate bilateral or unilateral NDAs between two parties. For example, you can enter into a single multilateral NDA with parties A, B, and C instead of entering into three separate bilateral NDAs between A and B, B and C, and A and C.

The requirements for a non-disclosure agreement are:

• The names of the parties involved in the agreement. 
• A definition of confidential information in the agreement
• The period involved
• Any exclusions from confidentiality 
• A provision for the use the confidential records.  
• Miscellaneous provisions

This last “miscellaneous” section may include the law or state law applicable to the contract, the party paying the attorney’s fees in the dispute, etc. 

Benefits of Using a Non-Disclosure Agreement

• Various clauses of the Non-Disclosure Agreement also draw the timeline up to which the party is obliged to maintain the secrecy. This period could be beyond the effective period of the NDA itself.

• It clearly states (in written format), anything that comes under the bracket of ‘confidential’, in the long run avoiding any ambiguity or loss of information.
• Overall, it protects disclosures of intellectual property (including trade secrets, proprietary information, and other confidential information), safeguarding the organization as a whole.
• The dispute can be referred to the Arbitrator or even taken to court if the level of violation demands. That’s how the owners of the confidential information is granted relief as they have taken an effort to safeguard the shared confidential information through the Non-Disclosure Agreement.
• Gives the employer additional legal recourse,If an employee discloses a company trade secret, many states permit the employer to file a misappropriation claim under state law. But if the employee also signed an NDA, the employer may be able to pursue legal remedies under that agreement. And in many cases, pursuing a breach of NDA claim is simpler for employers than a trade secret misappropriation claim.

WHAT HAPPENS IF YOU BREAK THE NDA

The penalties for the breach of the agreement are generally specified in the agreement itself and the breaches or infringements are accordingly dealt with. If in any agreement the penalty is not specified, it is clearly mentioned that the person guilty of a violation or breach of contract shall be sued for such misappropriation.

Confidentiality agreements make it easy to create cheap, legally binding documents between two or more parties that keep your personal information confidential.

Organisations and individuals use them to protect their businesses and personal information and enable companies to work together without fear of personal information falling into the hands of competitors.

When drafting a non-disclosure agreement, it is important to be as detailed as possible so that all parties can and cannot share and know the consequences of the information breach.