A non-disclosure agreement (NDA) is a contract used by a business or individual to keep sensitive information private. It is used in dealings with third parties such as investors, banks or other companies to prevent them using or passing on knowledge obtained from their dealings with that business or individual.
An NDA is a legally binding contract. As with any contract it should list the parties to the agreement and specify the information to be covered as clearly as possible. It should also detail the permitted use of information and ideas, for example copying of documents and discussions with other parties outside of the agreement.
It is not essential that a notary or witness sign an NDA. But the parties may want to use a witness to be sure that the validity of the document cannot later be called into question. A witnessed document has a longer limitation period for bringing a claim for breach of contract, ie. 12 years instead of 6 years.
An NDA should specify the term for which it will be in effect, for example 2 or 5 years. It is also possible to draft a non-terminating NDA which would be useful for protecting trade secrets and which would remain in force permanently. Should information become publicly available however, it is not then protected by an NDA.
A one-way NDA protects only one party’s information. If the other party does not require any confidentiality then this agreement may be easier to draw up as only one party’s terms need to be specified. A two-way NDA protects the confidentiality of both parties. It can help build trust between parties and a sense of parity in future negotiations.
A mutual NDA, which is also commonly referred to as a confidentiality agreement, covers both parties under the same terms. It is also possible to have multilateral NDAs covering three or more parties.
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