Non-Disclosure and Confidentiality Agreements: A Brief Overview

What is a confidentiality Agreement?

A confidentiality agreement, also called a nondisclosure agreement or NDA, takes the notion of keeping a secret for a certain period of time. The legal definition of NDA is that it is a legally enforceable contract that creates a confidential relationship between two individuals or parties. Normally one person or party holds some secret information or trade secrets and another individual who is receiving the confidential and secret information.  This contract creates a legal obligation to keep certain information confidential, not shared with third parties unless specified in the agreement, and compels those who agree to keep certain disclosed information secret.  Failure to maintain the secrecy of the disclosed information may subject the individual to liabilities.

Purpose: The purpose of the NDA is to protect certain trade secrets, ideas, research, business model, patented information, plans, charts, numbers or any other document that has a valuable and patented information to the holder. NDAs are common in business settings to protect trade secrets or secret business information not normally shared with the public.  In many business settings, NDA is the first step in commence business relationship.  NDA is also used to protect the rights of parties in relation to their rights, entitlements, and duties.   The information to be protected in the NDA depend on the parties intentions. In other words, the parties can decide what is and what not secret information is.

Elements:  Regardless of the information protected, the NDA should contain basic minimum elements. The NDA may be exhaustive and may be general. The elements stated in the NDA depends on the negotiation of the parties.  The following list is by no means an exclusive list, it is only a suggestion of the main elements that we think should be part of the NDA:

a-       The name and addresses of the parties;

b-      The name and address of the person and or entity receiving the confidential information;

c-       The information protected; this is very important part of the agreement as it specifically state the information to be protected;

d-      Limitations on the use of the disclosed information;

e-      The information that are not subject to the NDA during the course of negotiation or business relationship;

f-        With whom the disclosed information may be shared;

g-       The time frame, the term of the agreement. In other words, how long will the information be protected;

h-      In case of breach of the NDA, who gets what and how?

What does it protect? 

The NDA protects only the information specified in the agreement. The NDA does not protect information that is not listed, mentioned, or agreed upon as expressly agreed on in the signed contract. It does not protect common knowledge information and indeed does not protect all aspect of the communication, negotiation or throughout the relationship.  The NDA is a tailored documents to the parties’ special need, business and relationship.

Types of NDA: NDA maybe unilateral when it binds only one party or bilateral and it binds two parties.

In the Unilateral NDA, it is a ONE way disclosing of information. In other words, one person or entity is disclosing information to the other. 

In the Bilateral NDA, or sometimes is called Mutual NDA, both parties will be sharing and or exchanging information that is intended to remain secret and be protected.  The bilateral agreement is common between two entities are trying to merge or enter into a t venture.

Can I use a General NDA?

The NDA is a tailored document and one size does not fit all.  Hence, each time an individual or an entity wishes to enter into a business relationship with new individual or new entity, a new NDA should be prepared specifically for that person or entity to cover all of the specific details that should govern the elements of the NDA.

Read before you sign.  It is common sense that before you sign any document, read it; the NDA is no exception. The NDA is a legally binding documents that has, at times, sever legal consequences in case of a breach. 

Disclaimer.  Nothing in relation to the enclosed information should be construed and or considered as legal advice for any individual, entity, case, or situation.  The following information is prepared for advertisement use only.  The information is intended ONLY to be general and should not be relied upon for any specific situation. For legal advice on your specific situation, we encourage you to consult an attorney experienced in the area of Business Law.