Non Disclosure Agreements
A Non-Disclosure Agreement (also called a “Confidentiality Agreement”) is a contract that outlines private information that will be shared between two (2) parties, with the purpose of restricting one or both parties from sharing the learned information with non-sanctioned individuals. Typically used in business situations, the agreement can be an extremely useful tool when used in the right circumstances. Common types of secrets protected by an NDA include business plans, recipes, designs, commercial methods, or practices.
Types of NDA’s
Generally speaking, there are two common types of NDA’s. They are as follows:
Unilateral Agreement – In this method, only one (1) party will be disclosing the private information (typically called the “Disclosing Party”) and the other individual or company (the “Receiving Party”) will be learning it. This is the most popular type of agreement and is used when companies hire new employees, for companies sharing their business plans, for doctors protecting their patient’s information, and many more.
Bilateral Agreement – Here, both parties receive and disclose confidential information to each other. While less common than a Unilateral Agreement, it is most commonly used in the business world, for situations such as mergers or for fostering trust between two companies conducting business.
When to sign an NDA?
Although NDA’s may appear as a document only used for specific scenarios, they are rather prevalent in several industries and fields in the world today. Preventing you or your company’s confidential information is a must for staying competitive, avoiding lengthy court battles, and for keeping your focus on the things that matter most. The following are situations which are commonly protected by the binding contracts:
- Hiring a Freelancer – Are you a digital company looking for a new programmer? How about a company looking to outsource your marketing? If the freelancers will have access to any secretive information (which 9 times out of 10 they will), signing an NDA can ensure the information they learn while working for you can’t be shared with competitors or third (3rd) parties.
- Mergers, Sales, and Acquisitions – All three will most likely require the sharing of your company’s business plan and operations – as the potential buyers or partners will want to ensure they are making the correct decision.
- Potential Investors – This one is tricky, because the majority of investors will not sign an NDA for the simple reason that they can be listening to several business pitches a day, and signing every NDA that comes there way would be impractical. However, in the technology industry, having an investor sign an NDA is more common, as the technology can be so damaging if landed in the wrong hands that they won’t pitch unless one is signed.
- Hiring new employees – One of the most common situations in which NDAs are signed is during the hiring of a new employee that will have access to confidential information. If there is even a minor risk of an employee learning a Trade Secret, when in doubt, have them sign an NDA.
The above are only a few of the situations in which signing an NDA is wise. From medical practitioners to librarians, the applications of Non-Disclosure Agreements are widespread.
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