Businesses frequently share sensitive information with other parties. A nondisclosure agreement allows the parties to respect the confidential information provided to them. There are many advantages of using a nondisclosure agreement which contributes to the increasing need for people to learn how to write a nondisclosure agreement.
This article will give you the full details you need to know when writing a nondisclosure agreement, the types of nondisclosure agreements and how they can be enforced.
What Is a Written Nondisclosure Agreement?
A written nondisclosure agreement, also referred to as an NDA, is a legal document prohibiting parties to share confidentiality agreement unless previously authorized. An NDA defines the confidential information and sets limitations on sharing it within or outside of your organization.
Nondisclosure agreements are commonly used in business with employees, vendors, customers, investors, and other types of parties. Given how valuable some proprietary information can be, it is important to always have an NDA in place with another party if you choose to disclose confidential information.
Here is an article about the definition of a nondisclosure agreement.
Nondisclosure Agreement Templates
Types of Nondisclosure Agreements
Given every business engagement is different, there are different types of nondisclosure agreements you can use to make sure you’re best protected. Below is a list of different types of nondisclosure agreements:
- One-Sided Nondisclosure Agreement : A one-sided nondisclosure agreement will be put in place between two parties. Confidential information is shared by one party, and the other party is restricted in sharing the information with any other party. One-sided NDAs are good for situations where you may be sharing confidential information with another party and do not to expect to receive anything confidential in return. You would rather not place restrictions on yourself if you don’t need to.
- Mutual Nondisclosure Agreement : Mutual nondisclosure agreements bound both parties to confidentiality. Often, businesses on both sides of a transaction will disclose confidential information and want their information protected. The two parties involved in the agreement both agree to keep the information confidential.
- Multilateral Nondisclosure Agreement : Multilateral nondisclosure agreement involves more than two parties, and the parties agree to share confidential information between themselves. All the parties involved also agree to protect the shared information from external bodies.
- Employer-Employee Nondisclosure Agreement : Employees typically have access to sensitive business information while employed by their employer. Employers will often require the employees to sign an NDA to make sure their information stays protected. The last thing an employer would want is for an employee to disclose sensitive information to a competitor, like a customer list. Employees are bound by confidentiality when they sign the NDA.
Here is an article about the types of Nondisclosure agreements.
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How To Write a Nondisclosure Agreement – Step by Step
Listed below is a step-to-step guide on how to write a nondisclosure agreement.
Step 1: Disclosing and Receiving Parties
To start your NDA, you will want to establish the names of the parties so it is clear who will be bound by confidentiality. The two parties typically involved are the ‘disclosing party’ and the ‘receiving party’. For a mutual NDA, both parties will be disclosing and receiving confidential information. It is important to document the parties in the agreement using their full legal name.
Step 2: Defining the Confidential Information
After establishing the parties, you must clearly define what constitutes as confidential information to be shared by the two parties. Examples of confidential information shared by the parties involve trade secrets (patent details, unique formulas, software development, etc.), business ventures (partnerships, audits, consultations, etc.), customers (customer lists, contact details, sales history, etc.) volunteering, original artwork, and more.
The agreement will state what is considered ‘confidential’ between the two parties, and the agreement must also disclose the amount of information the receiving party is allowed to give out, if any.
Step 3: What isn’t Considered Confidential Information
After defining what’s considered confidential information, other types of information that cannot be protected by the nondisclosure agreement should be stated. Establishing what isn’t considered confidential will help to avoid future disputes.
Typically, ‘non confidential information’ as stated in the nondisclosure agreement includes information already known to the public, information that the other party already has access to, and independently developed information already discovered by the other party.
Step 4: Stating of Nondisclosure agreement
Nondisclosure agreements will typically include nondisclosure obligations. Nondisclosure obligations are typically comprised of several clauses that detail the various obligations put in place between the two parties as it relates to the confidential information. It is important to clearly state what each parties obligations are so that you avoid future disputes.
Stage 5: Time Frame
Nondisclosure agreements should also state the time frame or term of the agreement. It isn’t practical to require a party to keep the information you share confidential for an indefinite time period. The term of the agreement will include the starting date, or effective date, of keeping the confidential agreement and the time of expiration.
The term of a nondisclosure agreement may occur when the agreement expires, when the transaction between the two parties has been completed, or when a specific time has passed.
Stage 6: Jurisdiction
All nondisclosure agreements should include a governing law clause, which sets the jurisdiction for the agreement in case of a future dispute. Given laws vary by State, it is important to have your NDA governed by the State laws your business is governed by.
Step 7: Signatures
In order for the NDA to be legally binding, all parties involved will need to sign and date the agreement. The representatives that sign are usually people that may share, obtain or keep information for the specific transactions and are often officers of the company.
Step 8: Additional Clauses
There are other clauses you may consider including in your nondisclosure agreement. This may include severability clause, termination clause, and more.
Here is an article about how to write a Nondisclosure agreement.
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What’s Typically Included in a Nondisclosure Agreement?
After understanding the necessary steps to take when writing a nondisclosure agreement, you must know the essential elements to include. Although nondisclosure agreements may vary in type, the following items are common for all nondisclosure agreements.
- Names of the parties (disclosing and receiving parties) to the agreement.
- A clear idea of what you consider as the confidential information for the circumstance
- Exclusions from the confidentiality information
- Stated statement of the information that you allow the receiver to reveal
- The time period of the nondisclosure agreement
- Signature for the parties involved
- Miscellaneous provisions
Here is an article about what is included in a Nondisclosure agreement.
How Enforceable is a Nondisclosure Agreement?
As earlier stated, a written nondisclosure agreement is a legally binding agreement that requires a party(s) to not disclose confidential information that may be shared with them. Therefore, to enforce your nondisclosure agreement, you must ensure that the agreement between you and the other party is valid, and you must be able to establish any breach of contract.
A breach of contract in a nondisclosure agreement may occur when one party doesn’t live up to the obligations laid out in the agreement. This may include one party disclosing information the agreement deems as confidential.
Enforcing an NDA can be handled inside a court, but can also be handled privately through some sort of settlement or mediation. Enforcing the breach of the nondisclosure agreement in the court will require filing a lawsuit and providing evidence that the breach occurred.
Here is an article about how to enforce a nondisclosure agreement.
Who Helps with Nondisclosure Agreements?
Given a nondisclosure agreement is a fairly routine document, most lawyers will be able to draft or review them. Business lawyers work with nondisclosure agreements frequently, and they can best advise on what to include, if you should sign, or whether there has been a breach.
Post a project in ContractsCounsel’s marketplace to receive free bids from lawyers who work with nondisclosure agreements. All lawyers have been vetted by our team and peer reviewed by our customers for you to explore before hiring.
