Anytime you are asked to sign a contract, you should make sure you understand precisely what you are agreeing to and what the implications of the legal document might be. Many companies or wealthy individuals use non-disclosure agreements (NDAs) as a standard practice to protect their secrets and maintain confidentiality. Read on to learn what an NDA is and what terms you should look for when deciding whether to agree to sign.
What Is a Non-Disclosure Agreement?
Trust is one of the foundational aspects of a strong business relationship. Each party must show that they are reliable and will carry out their end of the agreement. When two parties are just getting to know each other at the beginning of a business relationship, trust has not yet been earned. In these situations, a non-disclosure agreement can be helpful.
An NDA is a binding legal contract that makes up for a lack of trust by clearly establishing what each party expects from the other and the penalties for any breach. By signing an NDA, you agree that you will receive non-public information and keep that information private.
Situations that may call for an NDA include:
- Entering into an employment contract
- Receiving access to a client’s private databases or servers
- As part of a legal settlement
- Relationships with public figures
An NDA can be a bilateral or multilateral contract where two or more parties mutually disclose private information and agree to keep those disclosures confidential. On the other hand,a unilateral NDA is signed between the disclosing party and a recipient. The receiving party promises to keep the disclosure secret.
If an NDA is breached, the injured party may seek legal damages through a lawsuit for breach of contract. The NDA might explicitly outline what damages may be sought or leave the calculation of the harm suffered to the courts.
What To Do if You Are Asked To Sign an NDA
Before signing an NDA, thoroughly review the contract and familiarize yourself with the terms and the purpose of the agreement. Always make sure to read the entire document and consult with an attorney if needed.
When reviewing the document, pay particular attention to the following considerations:
Identify Whether the NDA Contains Vague or Broad Language
An NDA should explicitly inform all parties of their duties. Therefore, if you cannot determine what conduct you need to undertake and what information is to remain private, the NDA may be unenforceable. Similarly, specific provisions would invalidate an NDA, especially if they are oppressive or require illegal actions.
Parties To the Agreement
The contract should clearly identify who is agreeing to be bound to its terms. It should also explain who is disclosing private information (the disclosing party) and who is receiving the information (the receiving party).
The NDA should also contain authorization to disclose the information in limited circumstances. For example, are you allowed to share the information with your attorney? What about a government agency? Be sure to check for these provisions.
Identify What Information Is Confidential
The entire purpose of using an NDA is to protect the secrecy of certain information. The agreement should clearly state what is being kept confidential.
Examples of confidential information that an NDA might protect include:
- The amount of money paid or other terms of a legal settlement
- Proprietary information like trade secrets or patents
- Personal information
- Data stored on servers, such as customer lists, web-traffic, or financials
No matter the contents of the secret, you need to be able to understand what it is you are agreeing to protect.
Agreement Duration
How long do you have to keep the disclosed information to yourself? An NDA can be perpetual, which means it exists as long as the public is not aware of the private information. However, businesses often agree to keep information non-public as long as they continue their working relationship. Additionally, the contract may have a survival clause that requires continuing non-disclosure even after all other terms of an agreement have ceased.
Consequences of a Breach
There are a variety of legal remedies available to the disclosing party when the receiving party breaches an NDA. For personal or especially damaging information, the disclosing party may want to seek an injunction. An injunction is a court order against disclosure that can prevent a violation before it occurs or limit a breach in progress. If sought quickly enough, an injunction can allow the disclosing party to avoid a harmful outcome.
Other situations may call for monetary damages as compensation for the damage suffered after the information becomes public. For example, leaking a retailer’s customer database may result in reputational harm plus the costs of paying for identity protection services for all the customers affected by the breach.
Return of Information
If the provision of confidential information is meant to be temporary, a return of information clause can be added to an NDA. For example, if a company provides its web-tracking data to an outside vendor to create a marketing campaign, the NDA may include a clause explaining how the marketing vendor should destroy their copy of the data after the campaign’s completion.
Extra Clauses
A few additional clauses that may be found in an NDA include:
- Governing law - a clause that explains what country or state law will govern any disputes
- Default dispute resolution - some contracts will mandate all disputes be resolved in arbitration rather than through a lawsuit
- Non-solicitation - companies may include a non-solicitation clause to prevent their employees or clients from being poached after disclosure.
- Publicity - can you or your company list the disclosing party as a client on your website or resume?
Being asked to sign a non-disclosure agreement should not have much impact on how you conduct your business. However, educating yourself about what you are agreeing to do is always wise. Because an NDA is a legal contract, make sure you examine the document thoroughly to avoid unintentionally consenting to an unfavorable or unreasonable agreement.
Table of Contents:
Table of Contents:
Anytime you are asked to sign a contract, you should make sure you understand precisely what you are agreeing to and what the implications of the legal document might be. Many companies or wealthy individuals use non-disclosure agreements (NDAs) as a standard practice to protect their secrets and maintain confidentiality. Read on to learn what an NDA is and what terms you should look for when deciding whether to agree to sign.
What Is a Non-Disclosure Agreement?
Trust is one of the foundational aspects of a strong business relationship. Each party must show that they are reliable and will carry out their end of the agreement. When two parties are just getting to know each other at the beginning of a business relationship, trust has not yet been earned. In these situations, a non-disclosure agreement can be helpful.
An NDA is a binding legal contract that makes up for a lack of trust by clearly establishing what each party expects from the other and the penalties for any breach. By signing an NDA, you agree that you will receive non-public information and keep that information private.
Situations that may call for an NDA include:
- Entering into an employment contract
- Receiving access to a client’s private databases or servers
- As part of a legal settlement
- Relationships with public figures
An NDA can be a bilateral or multilateral contract where two or more parties mutually disclose private information and agree to keep those disclosures confidential. On the other hand,a unilateral NDA is signed between the disclosing party and a recipient. The receiving party promises to keep the disclosure secret.
If an NDA is breached, the injured party may seek legal damages through a lawsuit for breach of contract. The NDA might explicitly outline what damages may be sought or leave the calculation of the harm suffered to the courts.
What To Do if You Are Asked To Sign an NDA
Before signing an NDA, thoroughly review the contract and familiarize yourself with the terms and the purpose of the agreement. Always make sure to read the entire document and consult with an attorney if needed.
When reviewing the document, pay particular attention to the following considerations:
Identify Whether the NDA Contains Vague or Broad Language
An NDA should explicitly inform all parties of their duties. Therefore, if you cannot determine what conduct you need to undertake and what information is to remain private, the NDA may be unenforceable. Similarly, specific provisions would invalidate an NDA, especially if they are oppressive or require illegal actions.
Parties To the Agreement
The contract should clearly identify who is agreeing to be bound to its terms. It should also explain who is disclosing private information (the disclosing party) and who is receiving the information (the receiving party).
The NDA should also contain authorization to disclose the information in limited circumstances. For example, are you allowed to share the information with your attorney? What about a government agency? Be sure to check for these provisions.
Identify What Information Is Confidential
The entire purpose of using an NDA is to protect the secrecy of certain information. The agreement should clearly state what is being kept confidential.
Examples of confidential information that an NDA might protect include:
- The amount of money paid or other terms of a legal settlement
- Proprietary information like trade secrets or patents
- Personal information
- Data stored on servers, such as customer lists, web-traffic, or financials
No matter the contents of the secret, you need to be able to understand what it is you are agreeing to protect.
Agreement Duration
How long do you have to keep the disclosed information to yourself? An NDA can be perpetual, which means it exists as long as the public is not aware of the private information. However, businesses often agree to keep information non-public as long as they continue their working relationship. Additionally, the contract may have a survival clause that requires continuing non-disclosure even after all other terms of an agreement have ceased.
Consequences of a Breach
There are a variety of legal remedies available to the disclosing party when the receiving party breaches an NDA. For personal or especially damaging information, the disclosing party may want to seek an injunction. An injunction is a court order against disclosure that can prevent a violation before it occurs or limit a breach in progress. If sought quickly enough, an injunction can allow the disclosing party to avoid a harmful outcome.
Other situations may call for monetary damages as compensation for the damage suffered after the information becomes public. For example, leaking a retailer’s customer database may result in reputational harm plus the costs of paying for identity protection services for all the customers affected by the breach.
Return of Information
If the provision of confidential information is meant to be temporary, a return of information clause can be added to an NDA. For example, if a company provides its web-tracking data to an outside vendor to create a marketing campaign, the NDA may include a clause explaining how the marketing vendor should destroy their copy of the data after the campaign’s completion.
Extra Clauses
A few additional clauses that may be found in an NDA include:
- Governing law - a clause that explains what country or state law will govern any disputes
- Default dispute resolution - some contracts will mandate all disputes be resolved in arbitration rather than through a lawsuit
- Non-solicitation - companies may include a non-solicitation clause to prevent their employees or clients from being poached after disclosure.
- Publicity - can you or your company list the disclosing party as a client on your website or resume?
Being asked to sign a non-disclosure agreement should not have much impact on how you conduct your business. However, educating yourself about what you are agreeing to do is always wise. Because an NDA is a legal contract, make sure you examine the document thoroughly to avoid unintentionally consenting to an unfavorable or unreasonable agreement.
Most Popular Posts
An eviction filed by your landlord hurts your credit report. It is also held as a public record and other landlords can view your previous rental...
As a property owner knowing squatter rights is crucial. These aren’t your ordinary delinquent tenants and knowing how the law treats them is...