What is anon-disclosure agreement (NDA)?

A non-disclosure agreement (NDA) is a way to share sensitive information while protecting your ideas and interests. NDAs are commonly used in business settings as they offer a legal safeguard to protecting trade secrets, such as sales and marketing plans, a new product or a unique manufacturing process. The Coca-Cola recipe, for example, has been kept secret for well over 100 years.

What is an NDA?

An NDA is a legally binding confidentiality agreement between two or more parties. It signifies the confidential relationship between parties that requires shared information to be kept private from parties not involved, such as competitors or the general public.

If an NDA is breached by one party, the other party may choose to sue the offending party for monetary damages and seek court action to prevent further disclosures.

Wanting another party to sign an NDA may be perceived as overprotective, while not having an NDA signed may appear reckless. Below, we set out what to consider when deciding whether or not you should sign an NDA.

Who needs an NDA? 

It’s often good to use NDAs when erring on the side of caution. Courts are more likely to protect trade secrets if the party can prove they have made ‘reasonable efforts’ to protect the secret — and an easy way to do this is to present NDAs signed by employees and business partners.  

There are certain instances where it is particularly beneficial to have an NDA signed. These include:

  • Hiring employees or contractors
  • Negotiating business contracts with other businesses
  • Pitching to potential investors
  • Sharing information about clients or customers for a specific company
  • Letting freelancers know their obligations and rights regarding proprietary information
  • Supply, distribution or franchise relationships with third party vendors, suppliers, distributors or franchisees

What to include in an NDA? 

A key advantage of an NDA is that it is adaptable to the needs of your business and is able to specify the information to be protected.

Although NDAs vary to a degree, there are five key elements to include:

  • Details of parties to the agreement
  • Definition of what constitutes confidential information
  • Exclusions from confidential information
  • Time periods involved
  • Consequences in the event of a breach of a NDA provision (e.g seeking an injunction to prevent further disclosure)

Creating your own NDA and having it signed forms a valid contract. However, it’s a good idea to seek an independent legal adviser to draft or review the NDA to ensure that you and your business are fully protected under the law.

If you have questions about an NDA that you have signed, or you need to draft an NDA, please contact our friendly team.