Posted 14th November 2024
NDAs or non-disclosure agreements are essential documents for many businesses looking to protect sensitive information during transactions. In this guide, we’ll explore everything you need to know about NDAs including what they are, how to write them, the benefits of using this type of agreement and more. By understanding how to effectively write a non-disclosure agreement, you can ensure that any important business data revealed during a document transaction is kept secure and confidential.
A non-disclosure agreement (NDA), also known as a confidentiality agreement, is a legally enforceable contract between two or more parties. It outlines the terms under which sensitive information or ideas can be shared while ensuring that this information remains private. By signing, all parties commit to not revealing specified details to any outside individuals or organizations not covered by the agreement.
NDAs are used in various ways across a wide range of businesses and industries. Some examples of how they can be used include:
Non-disclosure agreements are extremely important as they help to ensure that a business’s intellectual property and trade secrets are protected from their competitors. Before drafting an NDA, the parties involved should be identified, including the disclosing party (the owner of the confidential information) and the receiving party (who is agreeing not to disclose).
The main advantage of a non-disclosure agreement (NDA) is that it establishes a formal, legal duty for all signatories to protect an organization’s sensitive information. This assurance allows businesses to confidently share confidential details, knowing that these won’t be improperly disclosed or accessed by unauthorized parties.
For example, NDAs for employment contracts can help prevent an employee from divulging any intimate knowledge they have about the business. Also, it can protect trade secrets or proprietary information from being shared by current or previous employees, especially from being told to competitors that could gain them an advantage in the market.
When drafting your NDA there are some key elements that you should include which we will discuss below. It’s important to note that whilst you don’t need a lawyer to create the agreement, it is advised to have someone with legal knowledge and expertise to review it. This is to ensure that the document fully protects the interests of your organization.
The agreement should cover what information is classed as confidential. Typically this section of the document is fairly broad to incorporate everything someone could reasonably expect to be confidential. It should protect your organization and any intellectual/proprietary information from being shared.
This section should include the specific obligations of the receiving party in keeping the information confidential. In most cases, this includes any limitations on the disclosure, the duration of the confidentiality, and the general steps to be taken that prevent access to the information by others. The section needs to be clearly defined, and it is particularly important to have a legal expert review it, as it will ensure you are protected from breach of contract.
Generally, any information that is already in the public domain won’t be included in a non-disclosure agreement. Additionally, this section will outline where disclosure is allowed, for example, to employees, legal representatives, contractors, or when it is required in the regular course of business processes with related third parties.
It’s important to include what would happen if the NDA was breached. These consequences may be in the form of legal action including financial compensation, taking out a legal injunction, damages, or other legal fees.
These terms should include the length of the agreement and the conditions under which it can be terminated. The terms and conditions of a non-disclosure agreement can vary broadly, for example, some may extend for an indefinite period of time, whilst others may be limited to a specific amount of time, like five years.
Although both terms are often used interchangeably and they both exist to protect sensitive information from being disclosed, there are some differences between the two agreements. The biggest difference between NDAs and confidential agreements is that NDAs are commonly used in agreements that involve the one-way communication of sensitive details. Whereas confidentiality agreements are used when a transaction requires the involved parties to share information with each other.
For example, an organization may use an NDA when they hire a new employee to ensure they don’t discuss any confidential information with external parties. An NDA is suitable for this use case because all of the private information is being communicated one way, from the business to the employee.
A confidentiality agreement may be used when two businesses enter into a partnership that requires them to exchange proprietary information. Confidentiality clauses are typically included in agreements between original equipment manufacturers (OEMs) and their suppliers. This is because confidentiality agreements allow manufacturers to provide their suppliers with specifications about their products and enable the supplier to inform the manufacturer of their proprietary manufacturing methods.
To write a non-disclosure agreement, you need to understand its intended purpose. The most common purposes of NDAs include:
It’s important to consider the specific circumstances of your NDA and tailor the agreement accordingly.
An NDA can protect any information that an organization wants to keep confidential. This could include:
A non-disclosure agreement can become invalid if the contents of the document and conditions are too broad, the information included is already in the public domain, or a third party has discovered the information contained another way outside of the NDA. It can also be invalid if it is signed by an individual who didn’t have the required authority to do so.
If you want to streamline your NDA document processes, save time, improve accuracy, and maximise efficiency in your organization, eSign is the ideal solution. eSign is a leading electronic signature and digital document solutions provider that can help businesses with their document management. By using e-signatures you can reduce your document turnaround time significantly, meaning you can save time and finalise non-disclosure agreements quickly and seamlessly.
Contact us today to discuss your requirements with our digital transformation team and find a tailored solution that meets your needs. You can also get started with eSign by registering for our 14-day free trial, experience the features and functionality of the platform and see how it can work for your organization.
