-Non-disclosure agreements, also known as confidentiality agreements, are created to protect private and highly commercial sensitive business or company information, such as innovative ideas, customer lists, technical data, or manufacturing processes.
Failure to include NDA in your most critical transaction may leave you without any legal remedy, mainly if your valuable information is used without your knowledge or disclosed to your competitor.
NDAs are available in various styles and forms. They should also have a clause about non-use by the receiving parties besides restrictions on sharing information to third parties. Read through this post to learn about the basics of an NDA and how you can identify red flags.
Types of Information Covered by NDAs
As the party owning or disclosing the information, it is vital to have a broad definition of confidential information. Be clear and specific about the type of information you are going to reveal.
Typically, most NDAs cover proprietary, financials, confidential, technical, and other private information like business plans, software source codes, IP addresses, or any other trade secrets.
“Trade secrets” are private information that is considered valuable, and the owners have taken some actions to keep their secrets. These steps may include password protection, physical protection, encryption techniques, and asking people to sign NDAs.
Usually, there are common factors that are considered when confirming if the information is confidential. These factors include;
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- Any information already available to the public by the time of disclosure or afterward.
- Any information that is rightfully owned by the recipient without any confidentiality obligations or lawfully obtained.
- When the information is required to be used in court proceedings.
Instances When You Need to Sign a Non-Disclosure Agreements
NDAs should be signed in advance by two parties before getting into the various business discussion, transactions, or relationships. Some common ones include;
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While venturing into new projects as partners.
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Business mergers and financial acquisition.
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Request for proposals.
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IP development deals.
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Commercial agreements.
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Any other scenario that will require you to share or receive sensitive and confidential information with another party.
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One thing to remember is that there are two types of NDAs, One-way NDA and Mutual NDA. The first one means that only the recipient is mandated to protect the agreement. Second, both parties exchange the information and have the same obligations to protect it.
As a word of advice, if you are the one making disclosures, ensure you sign a one-way NDA to avoid tying yourself to unnecessary non-use agreements and confidentiality.
Common Red Flags to Watch Out for in an NDA
Being a legal document, you are required to be extremely careful. Have an eye for red flags and pitfalls that can cause serious legal consequences if assumed. Put into consideration;
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The period of the confidentiality obligation. For instance, receivers would want it to be shorter, and vice versa for the discloser.
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Ensure that the Non Disclosure Agreement obligates the receiver to keep any trade secrets confidential and not use it indefinitely.
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It is advisable not to disclose any compassionate information or “secret sauce” if you can avoid it until they get into the public domain.
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The relationship of the parties involved in the agreement.
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The use and purpose of the confidential information.
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Parties that are allowed to access the information.
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Any unwarranted clauses or provisions.
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A liquidated damages clause. Double-check and delete if someone might have sneaked such a clause to avoid paying some monetary value for any breach that occurs.
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An injunctive relief. Ensure it is provided to enable the discloser to seek an injunction from the court to barre the recipient from disclosing the information further in case of an alleged or actual breach.
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The attorney’s fee clause. Ensure the NDA provides that attorney’ fees incurred during legal battles enforcing the NDA be reimbursed.
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So if you need a free non disclosure agreement template for any state in US, you may download it online from this website.