Non-Disclosure Agreement (NDA)

NDA stands for non-disclosure agreement. This is a commonly used and important legal document that is applied both by individuals and companies to defend confidential information.

This provides legal protection so that the private data cannot be shared with the general public or rival companies by employees, consultants, and other parties who need access to this information.

However, an NDA is a legal document that is known by many names. Some of the most common alternative terms include:

  • Confidentiality Agreement (CA)
  • Confidential Disclosure Agreement (CDA)
  • Proprietary Information Agreement (PIA)
  • Secrecy Agreement (SA)

The following article studies the main features of NDAs and how they work in practice. It explains what varieties of NDAs can be used to protect confidential information, the essential details every non-disclosure agreement will usually contain as well as what happens if an NDA is violated.

Who Are the Main Parties Involved in an NDA?

There are two main parties that appear in every non-disclosure agreement. They are the ‘owner’ of the confidential information and the ‘recipient’ of the information.

When an NDA is signed the owner states in writing that they agree to share the confidential information with the recipient. However, this is on the condition that the recipient does not distribute the secret data with other parties.

When Is an NDA Useful?

NDAs are very common in workplaces and are gaining further popularity as the use of sensitive data becomes increasingly more prevalent in our information and technological-based societies. Some of the times when an NDA could prove useful include the following scenarios:

  • Sharing business models with potential investors
  • Providing information to journalists ahead of a product launch or major announcement (also known as a press embargo)
  • Working with outside contractors and third parties to make improvements in a business
  • Allowing workers to access sensitive information to perform their job functions
  • Permitting lab workers to access test results before patients and participants in trials may see them

What Types of NDA Exist?

NDAs can be used for many purposes. Usually, they are used when confidential data needs to be shared with an employee, contractor, or consultant to complete an essential task. However, they can also be used to protect sensitive information about a person or organization from being shared, for example when disclosed by a celebrity to a publicist.

This data is usually shared as part of a pre-agreed contracted agreement. As part of this contract, the owner makes their confidential information available so it can be used or protected by the recipient.

The exchange of information, however, isn’t always one-way. It is possible for more than one party to exchange confidential information between each other under the terms of a single NDA. Three main types of non-disclosure agreement exist:

  • Unilateral: Unilateral NDAs are written on the expectation that confidential information is only being shared by one party.
  • Bilateral: A bilateral or mutual NDA works on the principle that both the parties signing the agreement are disclosing secret information to each other.
  • Multilateral: This is a rarer form of NDA, where the information is being shared between three or more parties with at least one party distributing sensitive data to the others.