Non-Disclosure Agreements - When should you have one arranged?

When doing business, it’s inevitable to deal and share confidential information with individuals or other parties. When confronted with such a situation, you want to make sure of two important things: (1) the other party keeps and respects the confidential information; and (2) they won’t use such information to your detriment.

How do you go about ensuring these two essential aspects? The answer is to have a Non-Disclosure Agreement set in place. It is sometimes referred to as a “Confidentiality Agreement” or “NDA.” In the following section, we will explain what a Non-Disclosure Agreement entails as well as understand the key elements necessary to create an NDA.

 

Importance of Non-Disclosure

The main question is: when is it required for another party to sign a Non-Disclosure Agreement? There are many instances where it is imperative to set an NDA in place. However, it all boils down to when you need to convey something valuable about your business, but want to ensure that the other side doesn’t steal your information, and use it without your approval. An NDA is deemed extremely necessary for these reasons.

 

Common Scenarios Where Non-Disclosure Agreement Applies

At this juncture, it may be hard to picture exactly when the non-disclosure agreement applies. It’s best to cite a few examples for a better understanding. Below are some common scenarios where the NDA applies:

  • Presenting a new, fresh, and innovative idea to a potential partner or investor.
  • Sharing financial, marketing, and sales information with a potential buyer.
  • Showcasing a new product or technology to a licensee or prospective client.
  • Receiving services from an individual or firm having access to some sensitive information from your company.
  • Allowing employees access to confidential information during the course of their job.

 

Key Elements of Non-Disclosure Agreements

To understand how the non-disclosure agreement is set, it’s essential to know its key elements:

 

  • Identification of the parties: Before starting the business, identify who the disclosing party is and the recipient of the information. This is critical as only those who have been defined as persons or parties involved are allowed to deal with highly confidential information.

 

  • Definition of what is deemed to be confidential: This section of the NDA defines what confidential information means. It narrows the definition to a more specific scope than a broader sense, whether it’s in verbal or written information.

 

  • The scope of the confidentiality obligation by the receiving party: What is the obligation of the receiving party? It covers two important scopes: not disclosing confidential information and not using such confidential information. The former means the receiving party should keep the information as a secret. The latter entails not utilizing such information for any other purpose.

 

  • The exclusions from confidential treatment: It’s crucial to indicate the exclusions of the confidential agreement. Some common forms of exclusions are information already known to the recipient and the public. These may also include something disclosed to the recipient by other parties who have no duty to the disclosing party.

 

  • The term of the agreement: The term of the NDA stipulates how long the agreement should last. In most cases, the agreement should last forever. However, some parties see the need to have a specific term when the agreement ends.

 

Conclusion. 

In the business world, it’s one thing to deal with and share information among stakeholders involved, and it’s another to handle such confidential information as stipulated in the non-disclosure agreement. We hope that this post has shed some light on what you need to know about NDA and what are its key elements.

GLG Legal offers a range of corporate and commercial services tailored to clients needs. Get in touch with us for expert advice on Non-Disclosure Agreements and many other legal services.