In the business world, you'll often have information that needs to remain secret. If making that information widely known can negatively impact your interests, protect it with a Non-Disclosure Agreement.
Often, you'll need to make proprietary or sensitive information available to people you work with to complete a project or task. However, that may leave you vulnerable. With a Non-Disclosure Agreement, the person who learns the information is required to keep it secret and is forbidden from using it in any way not expressly stipulated by the agreement.
A Non-Disclosure Agreement is a legally-binding document that establishes limits to the use and distribution of specific and confidential information shared between two parties. It puts restrictions on an individual regarding how, when, and why the information can be shared or used.
Although just about anything can be deemed confidential, Non-Disclosure Agreements are typically made to protect information that can result in financial damages if misused.
Some examples of confidential information include
Intellectual property: Proprietary products, services, and business models are confidential intellectual property.
Accounting information: Contact info, names, and purchasing information of clients and distributors can be highly sensitive.
Customer data: Leaking customer information can make your business the target of lawsuits.
Depending on your state, a Non-Disclosure Agreement may also be known as:
Confidential Disclosure Agreement
Proprietary Information Agreement
Anyone who needs to discuss or share sensitive information can use a Non-Disclosure Agreement to protect that information. If you have a product idea you wish to sell or license, you'll need to reveal the details to potential buyers. An NDA with prospective partners protects your design from reaching competitors or its use as leverage in other negotiations.
Sometimes, you'll need to reveal proprietary information to employees in the normal course of business. An NDA prevents employees from sharing that proprietary information with a competitor or using it to start their own competing businesses.
You may even want to use a Non-Disclosure Agreement with a company you're providing services for. By being proactive about protecting their information, you can gain a business partner's trust as someone who understands the nature of their business.
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To create your NDA, please provide
Effective Date: The date when the agreement goes into effect.
Governing State: Select which state's laws will apply to the Non-Disclosure Agreement.
Disclosing Party: The full name and address of the person or entity disclosing information.
Definition of Confidential Information: The specific details about what information is considered confidential between the two parties.
Term: The duration of the agreement. You may choose to have the NDA persist in perpetuity or set an end date when the agreement no longer applies.
Exclusions: Information specified as not covered by the agreement.
Severability: A clause that makes the Non-Disclosure Agreement as a whole valid even if a court rules that parts of it cannot be enforced.
Unilateral: When a contract only covers information going one way. In other words, only information from the disclosing party to the receiving party is protected.
Obligation to Disclose: A section of the agreement that makes it possible to reveal confidential information without penalty under specific circumstances. Typically, this refers to information requested by a court or administrative entity.
Remedies: Acceptable consequences the disclosing party can request if the receiving party breaches the agreement by revealing information.
To be valid, a Non-Disclosure Agreement only needs two signatures — the disclosing party and the receiving party. It doesn't need to be notarized or filed with any state or local administrative office. However, notarizing the signatures on your NDA is a way to ensure no one challenges them later and firmly establishes the validity of the document.
Once both parties sign the document, each should receive a signed copy of the Non-Disclosure Agreement that they should keep in their respective personal records.
Because NDAs contain details about sensitive information, they should be kept in a secure location with limited access. Anyone who has access to the NDA should also be asked to sign an NDA. Mark sensitive documents as "CONFIDENTIAL" to show their proprietary nature.
Periodically, it's beneficial for both parties to review the terms of the agreement. The receiving party may come into contact with information not protected in the original contract, or the disclosing party may no longer need to protect certain information.
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