Information is extremely valuable today. Whether it’s a tech startup developing groundbreaking software, a corporate giant securing its market strategies, or an entrepreneur preparing for a strategic acquisition, safeguarding confidential information is of great importance for everyone. 

But how do organizations ensure their closely guarded secrets aren’t in the wrong hands? This is where non-disclosure agreements (NDAs) can be of help — powerful tools that protect the flow of sensitive data and establish trust among parties. 

Be it unilateral or mutual, NDAs behave as silent guards, preventing leaks that could cost companies their competitive edge. From shielding trade secrets to securing negotiations, understanding these agreements is essential for us in today’s competitive landscape. 

Let’s further discuss these confidential disclosure agreements and see how a signature can be the difference between keeping a secret and losing it.

What Is An NDA?

NDAs, or non-disclosure agreements, are legally binding contracts that develop a confidential business relationship between parties, ensuring that sensitive information stays private. 

Also referred to as confidentiality agreements or non-disclosure contracts, these agreements are common in business settings. For instance, employers often require new employees or contractors to sign NDAs to protect proprietary information and maintain a competitive edge.

Unlike service or sales contracts that outline terms of transactions or services, NDAs are all about protecting information. They act as a safeguard, giving parties the peace of mind to share data without the risk of unwanted disclosure.

Source: Pardalis & Nohavicka Lawyers via Platform X

Also Read: NDA vs. Confidentiality Agreement: Which One to Choose?

Sample NDA Template

A well-drafted NDA (Non Disclosure Agreement) will protect sensitive information shared between parties and establish a confidential relationship. While NDAs can vary based on purpose and context, there are several key provisions that form the foundation. 

First, the NDA should clearly identify the parties involved which are the information provider and the recipient. It must also specify the confidential information and how it should be handled, along with any exceptions, such as information disclosed in court proceedings or investigations. There is also an essential term provision that defines how long the agreement remains in effect.

Another important element is the return of confidential information, which ensures that, upon completion or termination of the agreement, the recipient will delete or return all confidential materials. 

Additionally, the NDA should detail the governing law and jurisdiction, clarifying which legal standards apply in case of any dispute. This can include dispute resolution mechanisms that will simplify addressing conflicts. 

It’s also vital to outline each party's obligations, penalties for breach, and the right to seek an injunction to stop any unauthorized disclosures.

“The absence of contract templates leads to non-standardization and makes contracts prone to errors. The legal team, therefore, is required to delve deep into contracts and proofread all clauses with a fine-tooth comb to identify and rectify the simplest of human errors.”

~ Igor Poroger, Director of Legal, EMEA, Vectra AI
How CLMs Empower Legal Teams in B2B SaaS Companies

You can find the free NDA template below. It's important to remember that while the nature and scope of NDAs may vary, these core elements are crucial to protecting shared confidential information effectively.

Download your free NDA template here!

Also Read: What is a Unilateral Non Disclosure Agreement (NDA)? (+ Free Template)

Why Do You Need An NDA?

At some point, every organization has to share sensitive information with outside parties, whether it's for new hires, investor talks, or a potential business partnership. NDAs play a vital role in keeping this information safe. So, when should you consider using an NDA? Here are five key scenarios:

Products: Selling or licensing products or technology requires the sharing of technical and financial data. An NDA ensures this proprietary information will stay protected.

Employees: Employees are often given the task of handling confidential data. An NDA prevents them from disclosing it during or after their employment.

Partners: Discussions with potential partners or investors involve sensitive details most of the time. An NDA keeps this information secure.

New Clients: Onboarding clients might give access to their private data. An NDA defines what must stay confidential to avoid legal issues.

Mergers and Acquisitions: Selling a business involves sharing critical data with buyers, brokers, and intermediaries. An NDA ensures confidentiality throughout the entire process.

NDAs are also significant when working with vendors, seeking investors, or engaging in joint ventures.

Types Of NDAs

Non-disclosure agreements (NDAs) come in two primary types which are unilateral and mutual (though there’s also a less common multilateral type). A unilateral NDA involves one party agreeing to keep shared information confidential, while a mutual NDA requires both parties to protect each other's secrets.

Despite their differences, both types hold the same importance regarding enforcement and violation penalties. For instance, an employment contract often includes a unilateral NDA where an employee agrees not to disclose sensitive information. 

On the other hand, in mergers or acquisitions, a mutual NDA is typical, ensuring all involved parties keep sensitive details private.

To decide between a unilateral or mutual NDA for your situation, consider these points:

• Business Type: Is the information exchange one-way or mutual (e.g., joint ventures or mergers)?
• Reciprocity: Are  both parties equally protected?
• Number of Parties: Are two or more parties parties involved, each contributing confidential information?

Source: Eureka Nirmani Jayaweera via LinkedIn

Also Read: Clickwrap NDA: Everything you Need to Know

Requirements For A Non-Disclosure Agreement

While NDAs can be modified to fit specific needs, there are six important requirements of an NDA.

Source: ContractHero

1. Participants in the Agreement

Every NDA needs to clearly identify who is involved. This could be a specific individual, all employees within a company, or any representative of an organization. Companies with complex legal structures must be precise. This ensures the right legal entity is named to maintain ownership of the information.

2. Defining Confidential Information

Pinpointing what is confidential is a critical step. The NDA should explicitly outline what information is confidential, as assumptions won't help. Broad definitions, such as any details linked to a company's R&D department, might be used.

3. Exclusions from Confidentiality

Sometimes, it’s easier to state what isn't confidential. Companies may specify exceptions to avoid any doubt and clarify what information can be freely shared.

4. Permissible Uses of Information

NDAs often include how shared information can or cannot be used. For instance, a company may disclose its processes but prohibit their use for competitive advantage or personal gain.

5. Time Frame

Confidential information isn’t valuable like forever. NDAs should include a time limit on confidentiality, recognizing that some information, like tech innovations, becomes outdated.

6. Additional Provisions

Lastly, NDAs may outline the applicable laws, dispute resolutions, or which party covers legal fees if issues arise. This section ensures the NDA is comprehensive and aligned with industry or government standards.

What Are The Exclusions And Limitations In An NDA

• Challenges in Enforcement: Enforcing a non-disclosure agreement can be a challenge. Especially if information has already been disclosed or if the scope of the NDA is too broad. Even when a breach has been identified, proving its damages or obtaining an injunction can be challenging for you.
• Public Interest: NDAs cannot keep the information private when it is associated with the public interest. A few examples include illegal activity, public health, and safety, or government transparency.
• Protection is Limited: An NDA will only protect the information that has been defined within the agreement. If certain details are not covered or are disclosed in ways that the NDA does not prohibit, they may not be protected.
• Time-limited Protection: NDAs usually have a time limit. This means that they only protect information for a limited period. Once the NDA expires, the confidentiality obligation will end. Then, the information can be disclosed to anyone freely.
• Jurisdiction is Limited: NDAs are mostly governed by the laws of a specific jurisdiction, which sometimes limits their enforceability in other regions. Cross-jurisdiction enforcement can be difficult if the parties are located in different areas.
• Reputation Risks: NDAs can sometimes attract negative attention or damage a company’s reputation. This is especially true if viewed as an attempt to cover up the wrongdoing or silence victims of harassment or discrimination.

Remember, not all information is covered by NDAs. Public knowledge records, like SEC filings or company addresses, are an example. In cases like these, courts can interpret an NDA in ways that may surprise the parties involved. 

The NDA no longer holds if confidential info is exposed through legal processes, like a subpoena.

Besides, managing too many NDAs can quickly lead to chaos for any organization. Handling each one individually becomes tough when the number increases.

Here comes the role of a standardized and flexible NDA. However, creating one that fits all needs requires time, effort, and often professional assistance to ensure it is solid and effective.

Advantages And Disadvantages Of NDAs

The purpose of NDAs is to keep your company’s sensitive information private. Whether it's new research, financial information, or future plans, an NDA will ensure that key data stays secret.

NDA is a signed legal document that clearly outlines what cannot be shared. It’s one of the most affordable ways to secure valuable information.

However, while NDAs prevent leaks, they can also create a few issues. Signing one can cause mistrust, which can sometimes impact relationships, especially with employees. When they know they are restricted about something post-employment, it can make them hesitant. 

Additionally, if an NDA is breached, it can lead to complicated legal battles. 

Enforcing A Non-Disclosure Agreement

Enforcing a non-disclosure agreement (NDA) is not simple, but there are clear steps companies can take to protect their sensitive information. Here is a streamlined approach:

1. Spoting the breach

The first step is to identify when the NDA has been breached. You can do it by monitoring employee activities or reviewing communications. This can also be done by conducting an internal investigation.

2. Sending a cease and desist

Once a breach is found, you can send a cease and desist letter. It will clearly state what was violated. Not only that, but it also demands an end to any further disclosures and sets a deadline for compliance.

3. Seeking injunctive relief

If the breach continues, you can also take legal action. You can do it by filing a restraining order or an injunction to stop further leaks.

4. Pursuing damages

If the breach has caused harm like lost profits or damage to your reputation, you can also consider pursuing monetary damages through a lawsuit.

5. Considering alternative resolution

In some cases, it might be faster and more cost-effective to go through arbitration or mediation rather than litigation.

“The keys to an enforceable user agreement come down to "notice " and acceptance” by the user.”

~Sterling Miller, CEO and Senior Counsel Hilgers Graben PLLC
Ten Things: Website User Agreements

Remember, the exact process can vary based on the NDA terms and local laws, so it’s always smart to consult a legal expert to ensure you’re on the right track.

Best Practices For NDAs

Drafting and managing NDAs can be a little complex. In fact, 61% of private market professionals say negotiating NDAs takes time away from more strategic tasks, and the process becomes even more complicated when you are dealing with international clients and employees.

HR and legal teams often face additional hurdles when creating NDAs for global teams. These include varying laws across regions, different data protection rules, getting legally valid consent and signatures, and keeping NDAs current.

Source: ContractHero

Find below some of the best practices for managing NDAs globally -

Understand Jurisdictional Differences

A common compliance mistake businesses make is ignoring jurisdictional differences. Not aligning with local laws when drafting NDAs can lead to serious risks, like unenforceable agreements that expose sensitive info and trigger legal trouble.

When working globally and drafting NDAs, keep these points in mind:

• Legal Compliance: Ensure your NDAs are aligned with local laws to avoid potential breaches or contract disputes. Remember, compliance also extends to data protection laws like GDPR if personal data is involved.
• Cultural Sensitivity: One must respect local customs and norms to establish positive relationships with international partners and employees.
• Enforcement Challenges: Different legal systems can make enforcement demanding. You must be aware of local methods to ensure that your NDA is enforceable.
• Translation and Interpretation: Accurate translations are essential. This is especially true when working across languages. You must pay attention to nuanced terms that could impact the agreement.

Stay Aligned With Data Protection & Privacy Laws

Data protection laws may vary across regions, with the GDPR being a key European example. When drafting an NDA, one should account for these laws, especially when handling personal data from employees or contractors.

These laws set clear guidelines, like obtaining consent for data collection, ensuring secure storage, and restricting personal data use. You protect individual privacy and your company’s interests by aligning your NDA with these requirements.

Always Obtain Consent & Signatures

Before having employees or contractors sign an NDA, getting their informed consent is crucial. This step ensures you comply with data protection and privacy laws but also sets a solid, transparent foundation for handling sensitive information.

However, securing valid consent isn't always straightforward. You may face a few hurdles:

• Language Barriers: Different languages can complicate understanding of consent terms. This makes it harder to ensure clear communication.
• Cultural Differences: People from different countries might have varying perceptions of privacy and legal agreements. Being sensitive to these cultural nuances is key for you.
• Proper Documentation: You must also keep accurate consent records to meet legal requirements.

“Now is the perfect time for in-house counsel to focus on how best to use electronic signatures at your company.  If you are already using them, that’s even better, but just make sure you are truly up-to-speed on the laws in your jurisdiction and that you have the right systems and procedures in place.”

~Sterling Miller CEO and Senior Counsel for Hilgers Graben PLLC
‍Ten Things: Electronic Signatures (What In-House Counsel Need To Know)

Avoid shortcuts like pressuring individuals for consent, as it can lead you to legal troubles. If consent isn't freely given, it could be voided, causing reputational harm, legal penalties, and ethical breaches.

Also Read: Five Things to Look for in an NDA

Creating And Signing A Non-Disclosure Agreement - Use Spotdraft Product Plug-In And Screenshots

Expanding your business globally is thrilling, but it also brings challenges. This is especially true when managing NDAs. Navigating international laws, regulations, and cultural differences can make it complicated for any business.

With Spotdraft, however, you can make it simple.  Easily customize it to fit your needs and get it signed by any worker with just a few clicks. Once it's signed, you're fully covered through Spotdraft.

SpotDraft streamlines securing contract consent with ease, offering simple, one-click solutions for high-volume approvals.

With ready-made templates and easy processes, it’s perfect for anyone, no tech skills required. Get started in minutes and launch your first NDA with Spotdraft. Are you ready to boost productivity? Click here to try it out!

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