The NDA is not a new concept as its political cousin prescribed by the Official Secrets Act has been around for many years. However, the necessity for maintaining secrecy in the business world is growing.
Leaked secrets can cause massive reputational damage and financial losses to companies, which is why they now insist that employees sign NDAs as part of the terms and conditions of their employment.
While some people might look at insisting on an NDA as going slightly overboard, it is essential to protect the information that gives your business the edge over any other. It is best to err on the side of caution by having an NDA instead of playing fast and loose with the data and losing out on potential revenues.
Defining the NDA
An NDA is a legal contract that prohibits the signatories from sharing confidential business matters with anyone else. Whether the contract is referred to as an NDA or a confidentiality agreement, the concept behind it is the same. Once both parties have signed the agreement, it becomes legally enforceable, and violating it can lead to severe sanctions.
When to use an NDA
The NDA has a myriad of applications in the business world. Examples include, but are not limited to, formulae, prototypes, patents, financial information, proprietary processes, and passwords.
This can apply to anything from an invention to a recipe to the manuscript of a book. Where a business owner can demonstrate that they will be allowing someone access to confidential information, they have the right to insist on that person signing an NDA.
Writing an NDA – where to start
Gather the following key pieces of information before you start drafting an NDA:
- The exact nature of the information you want to include in the agreement should exclude publicly available information.
- The term of the NDA, which can be fixed or indefinite when you expect the other party to maintain confidentiality forever.
- The penalties that a breach of the agreement would result in.
You can search through a comprehensive library of NDA samples at Net Lawman. Once downloaded, the template can be edited to suit your needs, and you can run it by a member of their legal team before you finalise it.
Be sure to include clear definitions in the agreement that will clarify the terms used in it. Be as specific as you can about what the other signatory may not share with anyone else. Information that isn’t explicitly mentioned in the NDA can be disclosed, and you would have a minimal legal remedy for the breach.
You should preferably seek legal advice once you’ve put your NDA together. An attorney can identify potential issues such as making the scope of the agreement unreasonable, including information in the agreement that is publicly available or having someone lacking authority signing the agreement on behalf of the company.
Types of NDAs
When you decide on the necessity for an NDA, you should be clear on whether it will be mutual or non-mutual. Most often, an NDA is non-mutual, meaning that it is one-sided.
Only the receiving party is required to maintain the confidentiality of information shared by the disclosing party. In a mutual NDA, both parties acknowledge an obligation to keep secret the knowledge that both will be sharing during the working relationship.
Additional uses of the NDA
Some employers expect prospective employees to sign an NDA before they go into a job interview. This is wise when company-specific data is shared during the interview for the candidate to interpret or disseminate. This type of NDA will differ slightly from a standard agreement.