Non-Disclosure Agreements (NDAs) have become a staple in the world of business transactions today. Even though they are one of the most important documents, many have resorted to underlying their importance due to the generic nature of the clauses in such agreements.
While the reputation these agreements hold is not very positive, there is a lot one should know about them and the clauses associated to protect the rights of an organization and the people they are associated with.
What is a Non-Disclosure Agreement?
A Non-Disclosure Agreement is a binding legal contract that prevents one party from revealing another party’s secrets. Hence, both the ends in a Non-Disclosure Agreement are engaged in a confidential relationship where the failure to keep their promises by either side can induce heavy financial and personal losses through legal means. While NDAs are already a complex piece of a legal document, they tend to get even more complicated as the information they cover is increased.
NDAs are put into effect to protect the information of:
- Trade secrets like recipes, manufacturing information, formulas or patented technology.
- Marketing, Product, and Service
- Information about customers.
- Intellectual Property
Types of NDAs:
Non-Disclosure Agreements are of two types –
Unilateral NDA: When one party cannot leak information about the other party. Most employees are bound by unilateral NDAs, and these NDAs are most common.
Mutual NDA: When both parties agree to not leaking each other’s secretive information, it is termed under mutual NDA. Businesses working together use mutual NDAs.
NDA Clauses that need to be put under the spotlight:
Defining “Confidential Information”
The whole point of having an NDA signed is to protect confidential information. Therefore, it is only natural to ensure complete transparency regarding the contents of this confidential information. Many agreements tend to contain ambiguous definitions and phrases in clauses that do not hold well in courts. This can be prevented by thoroughly going through the NDA contract and raising queries regarding such wordings.
Besides the disclosing and recipient parties involved in an NDA, there needs to be a clear mention of any other individual or groups that might get involved in due course of time to discuss future business.
Terms and Duration
Each legal Non-Disclosure Agreement needs to have a clearly defined time frame of validity which specifies the duration of the agreement and the end date. There is no strict time frame since confidential data and information might or might not be as relevant in the future. It all boils down to pre-decided time frames by the parties involved.
However, the disclosing party cannot put unrealistic time limits to bind recipients of the information. The process needs to be kept practical and viable.
Limits on Information Deemed Confidential.
There is always a limit to the information that is deemed confidential in the agreement. Moving from one organization to another that works in the same industry with a similar set of NDAs won’t serve to protect to serve the information in the new one as the employee already learned all that from the previous employers.
In certain cases, employees or partner companies are not under the obligation of the NDA and cannot be deemed responsible. This holds for revealing secret information under a court order, to a government employee or lawyers.