A non-disclosure agreement, or ‘NDA’, is a document used for preventing the sharing of confidential information. The contract identifies the type of info that must be kept secret, how long the recipient of the information must abide by the NDA, and what the recipient gains in exchange for signing the agreement.
The form is commonly used in business to encourage cooperation among two (2) parties without the risk of any shared info being used against the party disclosing it.
Definition: A legal document used as a means to protect and keep information confidential between two or more parties.
The party or person receiving information (“secrets”) is bound from disclosing them to the public or anyone not specified by the contract. Typically, an NDA will expire after a certain period of time, which is to be stated within the agreement. The most popular occurrence of two parties signing a non-disclosure is when a business hires an employee. However, a non compete is easily customizable to accommodate all aspects of relationships between two parties including dating.
A non-disclosure agreement can be drafted in three different ways to form the following types of relationships:
- Unilateral (“One-way”) – One party shares the information (the disclosing party), and another takes it in (the receiving party).
- Mutual (“Two-way”) – Both parties are required to keep information shared between each other under wraps.
- Multilateral – The sharing of confidential information when there are more than two (2) parties involved in the NDA.
Confidentiality agreement vs non-disclosure agreement?
The only difference between these two forms is the title. They both serve the same purpose, which is to contain and keep information private between two or more parties in the agreement.
How to get around a non-disclosure agreement?
If an NDA is signed, in writing, with an expiration date or everlasting, there is no way to “get around” the agreement. If legally broken, the party at fault could be liable to damages from the other party. Only if the information deemed confidential is now viewed as common knowledge by the public, may the non-disclosure agreement be deemed void or “unenforceable”.
Can a non-disclosure agreement be broken?
The short answer is yes, however, because a non-disclosure agreement is a legally enforceable contract, breaking an NDA allows for the opposing party to sue for financial damages (including legal costs). When a party’s position outweighs the potential legal costs of being sued, breaking an NDA is common.
How do non-disclosure agreements work? (in summary)
A non-disclosure agreement acts as a legal tool to hold others accountable for sharing information that could potentially harm a person or a company if shared with the public or competitors.
The following scenario is a generalization of what commonly takes place when working with an NDA:
- Party A seeks to be hired by Party B as the company’s accountant.
- Party B accepts to hire Party A pending the signing of a non-disclosure agreement that requires Party A not to disclose the company’s revenue strategy.
- Party B also requests that Party A keep the information confidential during their course of employment with the company and for the following 5 years after their employment is terminated.
- Both parties agree to the terms and sign the agreement, while both receiving a copy of the signed form.
Do non-disclosure agreements hold up in court?
A non-disclosure agreement is legally binding and enforceable, which means that, yes, the agreement will absolutely hold up in court if deemed valid.
How to sign an NDA?
The first thing to do before signing is to make certain that you are aware of the exact terms of the agreement which includes knowing what is considered confidential. The second is to know the rules – meaning which party is obligated to uphold the agreement (for example, is it unilateral or mutual?). Third and lastly, when does the NDA expire? NDAs can last for a specified amount of time or can last a lifetime.
To sign an NDA, upload or use our Non-Disclosure Agreement to fill out the details of the terms. Then send the NDA by email to each party for an electronic signature. Once all signatures are confirmed, the document becomes legally binding. Download a copy for your records.
How to Write an NDA
If the contract will be mutual (both parties providing info to each other), it does not matter who completes the document. If it will be unilateral, the disclosing party should draft the form in its entirety.
Step 1 – Party Info
At the top of the contract, write the date in which the document is being completed (day –> month –> year). Then, write the full legal names of the person(s) or business(es). If a unilateral form, “1st Party” should be the one sharing the knowledge. If mutual, it can be either party.
Step 2 – Agreement Type
Check one of the two (2) options provided. “Unilateral” should be checked if only one party will be listening to the secretive information, and one party providing it. Otherwise, “Mutual” should be selected.
Step 3 – Party Relationship
Here the parties can list their relationship to one another. For example, if the “1st Party” is the employer of the “2nd Party”, the first field will contain the word “employer” and the second field would say “employee”.
Step 4 – Obligation to Return Info
If at any time or for any reason, the disclosing party (or both parties, if applicable) wish to have the other party return said shared materials, the other party is required to comply. Write the number (#) of days either party has to fully comply with said request.
Step 5 – Governing Law (State)
Each state has its own statutes pertaining to trade secrets. Write the name of the state in which information will be shared.
Step 6 – Signatures
At a minimum, the 1st and 2nd parties need to sign the NDA. However, they can utilize witnesses and/or notarization to prove both parties willingly signed the form (and knew what they were signing). If witnesses are used, they should be unrelated to both parties.
Step 7 – Notarization
The last page is reserved for the Notary Public, if utilized. Notarization can be done online (see our homepage and click “Notarize”) or in-person. Keep the page attached to the document even if it is not used, as the markings at the bottom of the document state there are four (4) pages total, and a missing page can cause the court system to deny the validity of the contract.