Elements of a Confidentiality/Non-Disclosure Agreement

Non-Disclosure Agreements are more or less the same but certain small elements make a big difference. Make sure everything you need is in place.

1. Unilateral or Mutual? Mutual NDA’s are common when both parties discuss potential joint business ventures.
2. Scope. Defines what information is deemed confidential and whether it should clearly be marked as such.
3. Permitted Use and Disclosure define what can the information be utilized for and who else may have access to it. NDA may contain a clause stating that the receiving party must give notice to the disclosing party prior to passing that information on to the third parties for permitted uses. Such third parties (e.g. employees, consultants) must then agree to confidentiality obligations at least as protective of the confidential information as those in the original NDA. In any case, the recipient of information shall not be allowed to use it for any purpose other than the evaluation or negotiation of the proposed transaction.
4. Term of the Agreement and Duration of Obligation are not necessarily the same thing. It’s a good idea to state that the obligation of confidentiality survives the termination of the NDA for a period of X years after such termination.
5. Consequences of a Breach may be a combination or all of the following: a) fixed-sum amount per breach (“liquidated damages”), b) injunctive relief (court order), c) indemnification (the breaching party reimburses the innocent party for expenses of enforcement including attorney fees).
6. Jurisdiction and Choice of Law state where the confidentiality agreement will have to be enforced. This is particularly important if the negotiating parties are in different states or countries.

FAQ

1. What is a confidentiality agreement (NDA)? A confidentiality agreement (NDA) is a legal contract between two or more parties, where one party agrees to keep confidential and not to disclose the proprietary or confidential information of the other party.
2. Why do I need an NDA? NDAs are used to protect sensitive or confidential information that is shared between two or more parties, such as trade secrets, business plans, or other proprietary information.
3. What information is protected under an NDA? The specific information protected under an NDA is defined in the agreement’s scope section. This can include confidential information, trade secrets, business plans, and other proprietary information.
4. Can NDAs be mutual or unilateral? Both unilateral and mutual NDAs are commonly used. A unilateral NDA is where only one party is obligated to keep the information confidential. A mutual NDA is where both parties are obligated to keep each other’s information confidential.
5. How long does an NDA last? The duration of an NDA is defined in the term of the agreement and the duration of obligation sections. It can last for a set period of time, or it can continue indefinitely.
6. What happens if the terms of an NDA are breached? If the terms of an NDA are breached, the consequences can include fixed-sum damages, injunctive relief, indemnification, or a combination of these remedies. These consequences are defined in the consequences of breach section of the NDA.
7. Can NDAs be enforced in different jurisdictions? Yes, NDAs can be enforced in different jurisdictions. The jurisdiction and choice of law section of the NDA will specify where the agreement will be enforced and which country’s laws will govern its interpretation and enforcement.
8. What should I do if I believe that my confidential information has been disclosed in violation of an NDA? If you believe that your confidential information has been disclosed in violation of an NDA, you should consult with a lawyer to discuss your options and potential remedies. This can include seeking damages or injunctive relief.

9. Can an NDA be signed by employees or contractors? Yes, employees and contractors can sign NDAs to protect the confidential information of a company. This can include information about the company’s products, services, business plans, and other proprietary information.
10. Is it possible for an NDA to be enforced after the termination of the agreement? Yes, it is possible for an NDA to be enforceable after the termination of the agreement. The obligation of confidentiality may survive the termination of the NDA for a specified period of time, as defined in the term of the agreement and duration of obligation sections.
11. Can an NDA be amended or modified? Yes, an NDA can be amended or modified by agreement between the parties. This should be done in writing and signed by both parties to be legally binding.
12. Are there any exceptions to the information covered by an NDA? Yes, there can be exceptions to the information covered by an NDA. These exceptions are defined in the exclusions and exceptions section of the agreement and may include information that is already known to the receiving party, independently developed, or obtained through a third party without confidentiality obligations.
13. Can an NDA be used to protect sensitive information shared over email or other electronic communication? Yes, an NDA can be used to protect sensitive information shared over email or other electronic communication. However, it is important to ensure that the information is properly encrypted and protected to prevent unauthorized access.

14. Can an NDA be used to protect information shared between international parties? Yes, an NDA can be used to protect information shared between international parties. However, it is important to consider the differences in laws and regulations in different countries and ensure that the NDA is compliant with those laws.
15. Can a party be required to sign an NDA as a condition of doing business with another party? Yes, a party can be required to sign an NDA as a condition of doing business with another party. This is commonly done when the parties are exchanging confidential information or engaging in discussions about potential business ventures.
16. Can an NDA be enforced in a court of law? Yes, an NDA can be enforced in a court of law if the terms of the agreement have been violated. The consequences of breach section of the NDA will outline the remedies available to the non-breaching party.
17. Can an NDA be used to prevent a former employee from using confidential information obtained during their employment? Yes, an NDA can be used to prevent a former employee from using confidential information obtained during their employment. This is often done to protect the trade secrets and proprietary information of a company.
18. Is it necessary to have a lawyer review an NDA before it is signed? While it is not strictly necessary to have a lawyer review an NDA before it is signed, it is highly recommended. An attorney can advise on the terms of the agreement and ensure that it is legally binding and enforceable.

19. Can a party be held responsible for violating an NDA if they did not intentionally disclose confidential information? Yes, a party can be held responsible for violating an NDA even if they did not intentionally disclose confidential information. Negligence or carelessness in protecting confidential information can still result in a breach of the NDA.
20. What happens if a party breaches the terms of an NDA? If a party breaches the terms of an NDA, the non-breaching party may seek remedies as outlined in the consequences of breach section of the agreement. This may include a fixed-sum amount per breach, injunctive relief, indemnification, or a combination of these remedies.
21. Can a third party be held responsible for violating an NDA? Yes, a third party can be held responsible for violating an NDA if they had access to confidential information through the recipient party and did not comply with the confidentiality obligations outlined in the agreement.
22. Can an NDA be terminated before the end of its term? Yes, an NDA can be terminated before the end of its term by mutual agreement of the parties. The termination should be done in writing and signed by both parties to be legally binding.
23. What happens to confidential information after the NDA is terminated or expires? The obligations of confidentiality outlined in the NDA will still apply to the information even after the NDA is terminated or expires, as defined in the term of the agreement and duration of obligation sections.

29. Is it necessary to physically destroy confidential information once the NDA is terminated or expired? Whether or not it is necessary to physically destroy confidential information once the NDA is terminated or expired will depend on the specific terms of the agreement. If the NDA outlines an obligation to destroy confidential information, it will need to be followed.
30. Can an NDA be modified after it is signed? Yes, an NDA can be modified after it is signed, but the modification must be agreed upon by both parties and done in writing.
31. Can an NDA cover both oral and written confidential information? Yes, an NDA can cover both oral and written confidential information. It is important to clearly define the scope of what is considered confidential information in the agreement.
32. Can an NDA be signed electronically? Yes, an NDA can be signed electronically using e-signature software or platforms. Electronic signatures are recognized as legally binding in many countries, including the United States.
33. Is it necessary to have an NDA in place before confidential information is shared? It is highly recommended to have an NDA in place before confidential information is shared. An NDA provides a legal framework for protecting confidential information and can be enforced if the terms of the agreement are violated.

29. Does an NDA have to be signed by both parties to be legally binding? Yes, an NDA must be signed by both parties to be legally binding. Both parties must agree to the terms and obligations outlined in the agreement for it to have legal force.
30. Can a party be released from the obligations outlined in an NDA? A party can be released from the obligations outlined in an NDA if the releasing party agrees in writing to do so. This written agreement should be signed by both parties.
31. What happens if an NDA is violated by one party but not enforced by the other party? If an NDA is violated by one party but not enforced by the other party, it can be difficult to enforce the terms of the agreement in the future. It is important for the non-breaching party to take action to enforce the NDA and protect the confidential information if a breach occurs.
32. Can a court order a party to stop disclosing confidential information if they are in violation of an NDA? Yes, a court can order a party to stop disclosing confidential information if they are in violation of an NDA. This remedy is known as injunctive relief and is often included as a consequence of breach in NDAs.
33. Are NDAs enforceable in all countries? No, NDAs may not be enforceable in all countries. It is important to consider the jurisdiction and choice of law outlined in the NDA and ensure that the agreement is enforceable in the relevant legal jurisdiction.
34. Can an NDA be used to protect trade secrets? Yes, an NDA can be used to protect trade secrets, which are confidential business information with economic value that is kept secret by the owner. An NDA can be an effective tool for protecting trade secrets by outlining the obligations of the recipient of the information with regards to its confidentiality and use.
35. Can an NDA be used to protect personal information? Yes, an NDA can be used to protect personal information, such as sensitive information about individuals such as their name, address, and date of birth. However, depending on the jurisdiction, there may be specific laws that govern the collection, storage, and use of personal information, which would need to be considered when drafting an NDA to protect this type of information.
36. Can a third party be bound by an NDA? Yes, a third party can be bound by an NDA if they are given access to confidential information. This is often achieved by including a clause in the NDA that requires the recipient to provide notice to the disclosing party before disclosing the information to a third party, and requiring the third party to agree to confidentiality obligations at least as protective as those outlined in the original NDA.
37. Are there any restrictions on what can be included in an NDA? There are some restrictions on what can be included in an NDA, such as provisions that are illegal or unethical. For example, NDAs cannot be used to conceal illegal activities or to restrict competition in an unjustifiable manner.
38. Can an NDA be used to protect confidential information that is already in the public domain? No, an NDA cannot be used to protect confidential information that is already in the public domain. Confidential information loses its protected status once it becomes publicly available and cannot be protected through an NDA or any other legal agreement.

39. How does an NDA differ from a non-compete agreement? An NDA and a non-compete agreement are two different types of legal agreements that serve different purposes. An NDA is used to protect confidential information, while a non-compete agreement is used to restrict a party’s ability to compete with the other party after the termination of the agreement. A non-compete agreement typically includes restrictions on the type of work the party can perform, the geographical area they can work in, and the length of time the restrictions apply.
40. Can an NDA be used to prevent an employee from leaving and starting a competing business? An NDA can be used to protect confidential information, but it cannot be used to prevent an employee from leaving and starting a competing business. For this purpose, a non-compete agreement is typically used to restrict a party’s ability to compete with the other party after the termination of the agreement. However, non-compete agreements may be subject to certain legal restrictions and may not be enforceable in all jurisdictions.
41. Can an NDA be used to protect information that is considered confidential by one party but not by the other? An NDA can only protect information that is considered confidential by both parties. If one party does not consider the information to be confidential, it cannot be protected through an NDA.
42. How can an NDA be terminated? An NDA can be terminated if both parties agree in writing to do so. This written agreement should be signed by both parties and outline the terms and conditions of the termination. Alternatively, an NDA may specify the conditions under which it will automatically terminate, such as after a certain period of time or when the confidential information is no longer deemed confidential.

43. Is it possible to have an NDA without a written agreement? It is possible to have an NDA without a written agreement, but it is not advisable. NDAs are legal agreements that are enforceable in a court of law, and it is recommended that all NDAs be in writing to avoid disputes or misunderstandings. A written NDA provides a clear and unambiguous record of the terms and conditions of the agreement, which can be used as evidence in the event of a breach.