Quite simply, a non-disclosure agreement (NDA) is a legal document in which one or both parties agree not to disclose confidential information about the other for a set period of time.
You’ve come up with a brand new range of delicious ready meals and set up a limited company. To scale up and make your meals available in quantity, you need to outsource production. You won’t decide who to work with until you’ve seen all the quotes, yet the outsourcers can’t quote until they know exactly what your meals contain. You’ll have to share your secret recipe with businesses you’ve never worked with before.
A binding NDA allows you to provide confidential details to potential suppliers and prevent them from sharing that information to anyone else.
NDAs are used for a wide range of purposes. For example, you’ll also find them useful if you need to share:
Decide first what information you need to cover in your NDA and how it should be defined. Some NDAs say all documentation designated ‘confidential’ as well as anything discussed or displayed at meetings is subject to their terms. Make provision for any information a signatory may need to share with colleagues as part of the service you want them to provide. This could mean getting those individuals to sign your NDA as well, or getting an assurance that your signatory has adequate confidentiality clauses in their agreements with their staff and third parties.
Bear in mind that any information you cover in your NDA must be confidential when the document is drafted. If it subsequently gets into to public domain through no fault, action or omission on your part, the NDA will be unenforceable for that information.
This is down to you. Decide how damaging any unauthorised revelations will be to your business and at what point the damage becomes negligible or irrelevant. Most NDAs stay in effect for between two and five years, though you can stipulate that certain types of information, such as unpatented know-how or your client list, remain subject for ever.
There are two types of NDA – one way or mutual. So, if confidential information is flowing both ways, a mutual NDA is your best bet. If you draft a one way NDA, you may need to execute it as a deed for it to be enforceable.
It’s also important to state what law governs your NDA. If both parties to the agreement are in the same country, this is straightforward. If not (and remember, Scotland’s legal system is different to that of England and Wales, for example), you’ll need to set out which courts, if necessary, the agreement will be enforced in.
Always make sure the person signing your NDA has the authority to do so.
Once your NDA is signed and effective, keep a record of what confidential information you share, how you share it and when. This is particularly important if you present information, such as a slideshow, unpublished web pages or proposed logos, without issuing copies to the signatories. In this scenario, ask them to sign to confirm they’ve seen the information and that they understand it’s subject to the NDA.
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