A Non-Disclosure Agreement is a legally binding contract prepared to describe the conditions of the confidential arrangement approved by two parties.
Whether you have consulted with a prospective investor on behalf of your business, hired an employee who will be allowed to work with sensitive documents, or told a purchaser or tenant private details related to your real property, you may offer them to sign an NDA and avoid the release of the information that has significant value for your company or you personally to third parties that may take unfair advantage of it.
Once you decided an NDA is inevitable to guarantee your proprietary information is kept safe, it is time to negotiate the terms of the contract with the party authorized to work with it alongside you or individually. The first step you have to make is to choose the state-specific document whether you are going to draft a short Non-Disclosure Agreement or create a comprehensive contract to cover all the details that become known to one of the parties or both of them during their collaboration. Select the template suitable for your location to confirm you are adhering to local regulations that make your agreement legally enforceable.
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One of the essential elements that must be included in the text of the Non-Disclosure Agreement is the indication of whether both parties are under the obligation to keep the information they have learned during their cooperation confidential or only one party has to do it - the former contract implies the NDA is mutual while the latter is unilateral.
Make sure the responsibility to keep the details private applies to both individuals or companies that sign the papers if you had a mutually beneficial business relationship - for instance, a partnership or merger. In all other cases, a standard NDA can be unilateral since only one party is getting access to trade secrets, bank statements, internal records, etc. Note that you should anticipate a possible dispute taking place when your collaboration is over or terminated before the contract expires so discuss the non-disclosure rules you will follow once you start working with the other party.
While it is in the best interest of the business to sign a Non-Disclosure Agreement that lasts as long as the local laws permit it, realistically it is hard to enforce the other party to keep the sensitive information secret for longer than four or five years.
Besides, most trade secrets, inventions, technologies, business plans, and strategies shared during the time you have worked together have no real value in various industries after several years so it makes no sense to bind the employee, contractor, or legal expert to the terms of this contract. Yet, there is no one-size-fits-all solution - you should consider all the potential risks and prevent the party that was granted access to proprietary information from suffering an economic or reputational loss - insist on a long-term or indefinite agreement and specify the duration in writing to safeguard your company.
Usually, the consequences for violating the terms of the NDA are listed in the text of the document - at a minimum, there should be a reference to the law the parties will refer to when seeking compensation for the contract breach.
Even if you failed to include this provision in your agreement, the courts will accept the claim filed against the breaching party - in the majority of cases, you will be demanded to pay damages and cover the legal fees the plaintiff has incurred. Moreover, if the case is brought to public attention, you are risking your reputation especially when it comes to competitive industries and prominent companies that value public image - do not jeopardize your chances to be employed or invited to participate in an important project just because you decided to release sensitive information that does not belong to you.
Related Forms and Templates: