Non-Disclosure Agreement (Guide and FREE Templates)

Some businesses often ask new employees to sign a non-disclosure agreement if the employee has access to confidential company details.

Formally;

An NDA is a legal binding contract that creates a confidential relationship. The party or parties signing the contract agree that any personal information received will not be shared with anyone else.

A non-disclosure agreement is also known as a confidentiality agreement.

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Non-Disclosure Agreement- an Overview

Non-disclosure agreements are commonly used when companies negotiate with other businesses. They allow the parties to exchange confidential information without fear of it falling into the hands of competitors. In this circumstance, it is referred to as a mutual non-disclosure arrangement. If either of the parties involved violates the non-disclosure agreement, they will be liable for legal costs.

NDAs are often used before negotiations between a company looking for capital and potential investors. In such situations, the NDA is intended to keep competitors from acquiring the company’s confidential information or business plans.

Below are some important points to take away about a non-disclosure agreement:

  • An NDA recognizes a confidential relationship between two or more parties and safeguards the information they exchange from access by third parties.
  • Before negotiations begin between companies regarding possible joint projects, the NDA is commonly used.
  • Employees are always asked to sign non-disclosure agreements to protect an employer’s confidential business details.
  • A non-disclosure agreement is also called a confidentiality agreement.

The non-discloser agreement

This agreement is usually signed by new recruits who may have access to confidential company information. In such situations, the employee is the only one who signs the contract. In this situation, releasing the details to a competitor or the general public could cause irreparable damage to the business.

NDA vs. Non-compete

The major difference is that a Non-Disclosure Agreement prevents a party from disclosing details to a competitor, while a Non-Compete Agreement forbids the individual from working with a competitor. In the table below, we have stated the differences between a non-disclosure agreement and a non-compete agreement.

Non-Disclosure AgreementNon-Compete Agreement
Allows an employee to work for a competing company.An employee is not permitted to work for a competitor.
It does not allow an employee to reveal confidential details.It does not allow an employee to reveal confidential details.
There are no restrictions in any state.In certain states, it is prohibited (such as Arizona, California, Florida, Hawaii, Massachusetts, Texas, Utah, Virginia, and Washington).
Not exclusive to the jobs sector.It is restricted to the employment industry.

Writing a Non-Disclosure Agreement

An NDA is a form that can be written by an individual or with the assistance of an attorney. In this section, we have explained how to write an effective non-disclosure agreement.

Choose your form

Choose between the NDA Types or for a particular state. The document is typically customizable to a specific circumstance and the details you want to keep private.

Parties and the effective date

This introductory section of the form will include;

  • Effective date- This is when the non-disclosure agreement will become active.
  • First party/receptor- The individual or organization that is sharing confidential information is considered the first party. One of the NDA parties that will agree on how the sensitive information covered by this agreement will be managed here.
  • Second-party/recipient- The person or organization that is acquiring confidential information and is keen to handle the concerned details is mentioned following the requirements set out in this document in this section.

For example:

This non-disclosure agreement created on_____________(effective date) is between ___________(first party) and ___________(second party).

Add confidential information

The following should be included under the category of confidential information in the NDA form;

Trade secrets

Trade secrets are sensitive information only known by a person or organization that’s critical to the operation of their business. Trade secrets include:

  • Special formulas
  • Practices
  • Instruments
  • Software development
  • Technical designs
  • Blueprints
  • Customer lists
  • Patent details

Business ventures

A business venture is any new business that is founded to gain profit while also involving risk. Business ventures include:

  • Affiliate deals
  • Partnerships
  • Mergers
  • Real Estate
  • Consultations
  • Audits
  • Advertising and marketing
  • Pricing structures
  • Business and financial records

Creative endeavors

Creative endeavors involve advanced work from any field that allows one to create something new and original. Examples of creative endeavors are:

  • Documentary, TV, film, and news production
  • Illustrations, graphic design, and drawings
  • Web design
  • Inventions, prototypes, or product samples
  • Recipes

Add other information

The other types of information you could include are:

  • Visitor or factory tours
  • Bachelor or bachelorette parties
  • Volunteering
  • Celebrity meet-and-greets
  • House tours
  • Original artwork

Mention type of agreement

Indicate whether the agreement is unilateral or mutual in the agreement. Select the unilateral checkbox to establish the 1st party as the sole owner of the relevant confidential information or the mutual checkbox to ensure that the confidential information being addressed is shared equally between the 1st and 2nd parties.

The types are as:

  • Unilateral – This agreement shall be unilateral where the first party shall be the sole owner of the confidential information, with the second party being forbidden from sharing the confidential information to be disclosed by the first party.
  • Mutual – This agreement will be mutual where the parties involved will be forbidden from disclosing confidential information to be shared with one another.

Establish relationship

This section explains what kind of relationship the first party/party A has with the second party/party B. Also, explain party B’s relationship with party A.

For example:

Party A’s relationship with party B can be defined as__________. And party B’s relationship with party A can be defined as__________.

Proper usage of information

A statement is written to guide the receptor and the receiver on how to use the shared information.

For example,

“the confidential information shall not be shared with others apart from the parties involved.”

Misappropriation

Misappropriation occurs when an individual or organization uses sensitive information for personal gain or shares it with a third party. In this case, remember to mention the penalties that would be applicable.

Obligations

The majority of an NDA will be made up of Non-Disclosure Commitments, which specify the receiving party’s obligations to the disclosing party’s details. This section would most likely be made up of several clauses that outline different responsibilities rather than a single clause. Depending on the requirements, additional clauses can be added to this section of the NDA.

Here are some additional clauses to include in a Non-Disclosure Obligations section:

Non-disclosure of transaction

The Receiving Party agrees not to reveal to anyone that:

  • The agreement is being debated or negotiated.
  • The agreement has occurred, including the particulars of the partnership.
  • Confidential information has been shared or used by the disclosing party.

Non-solicitation

Either party can prevent the other from securing or offering employment to the other party’s employees or from shifting business away from the other due to this part of the form being included.

Non-compete

The parties agree not to participate in business practices that compete directly with the other party. Many businesses choose to make partners and employees sign separate NDAs and non-compete agreements.

Non-circumvention

A non-circumvention provision prevents the receiving party from bypassing the agreement and conducting business or communicating with specific contacts the disclosing party has shared.

 Miscellaneous provisions

Miscellaneous provisions in the agreement should cover details such as the applicable state law or legislation and who pays legal fees in the event of a dispute.

 Violations

The violations section of the agreement should state the consequences of breaching any requirement of the contract and the disciplinary actions that will be taken if a party breaks the non-disclosure agreement in any manner. It states the fines, if any, or any other punishment.

Exclusions from confidentiality

An “Exclusions” clause specifies the types of information that the non-disclosure agreement does not cover in it. A non-disclosure agreement does not cover the following types of information:

  • Information that was already in the public domain.
  • The information established or discovered independently by the recipient
  • Information that the receptor has specifically allowed the Receiving Party to share.

 Additional clauses

Every non-disclosure agreement will look different depending on the nature of the transaction, relationship, and details discussed. Below are some additional clauses that a non-disclosure agreement can have:

  • Remedies- The remedy clause outlines the outcomes/consequences of violating a non-disclosure agreement.
  • No license- Provides that the NDA does not grant either party any license, copyright, or control of the given information.
  • Severability- It states that if a portion of the NDA is found to be unconstitutional in court, the portion will be removed, while the remainder of the agreement will remain in effect.
  • Amendments- The amendment clause states that the non-disclosure agreement can be amended at any time.
  • Governing law- The governing law is the state whose laws govern and implement this agreement and the actions of the first and second parties regarding the sensitive information under negotiation. This is essential to be included in the form.
    For example:

This agreement will be governed under the laws in the state of__________(state name)

 Time frame/termination

The NDA should state clearly how long it will be in effect. The time frame outlines when the promise to keep sensitive information private begins (the “effective date”) and how long the protected information must not be shared with anyone (the “disclosure period”). Generally, the parties agree when the agreement’s duration will end (known as the “termination” provision).

For example, the non-disclosure arrangement may be terminated when the following events occur:

  • The agreement expires.
  • The transaction is completed.
  • A certain period has elapsed.

Signatures

A non-disclosure agreement must be signed by both Parties and their representatives. Representatives are people (e.g., managers, officers, staff, agents, or consultants) who can share, obtain, or protect the information in the course of carrying out the transaction stated in the non-disclosure agreement.

  • First party’s signature- If the first party is a business entity, its approved signature representative can sign this document on its behalf.
  • Date- The month, day, and year when the first party signed their name on the document.
  • Printed name- The full name of the first party should be printed to confirm his or her identity.

First party’s signature____________   Date____________
Print name______________________

  • Second party’s signature- The person or business entity designated as the second party or party B must deliver the binding signature.
  • Date – The date the second party signed his or her name.
  • Printed name – The recorded full name of the second party.

Second party’s signature_______________  Date___________
Print name__________________________

Download Free Templates

Here are free customizable templates :

By state

By type

Business Associate Non Disclosure Agreement

Commercial Real Estate Non Disclosure Agreement

Employee Confidentiality and  Non Disclosure Agreement

Financial Information Non Disclosure Agreement

Independent Contractor Non Disclosure Agreement

Internship Confidentiality and Non Disclosure Agreement

Interview Non Disclosure Agreement

Invention Non Disclosure Agreement

Landlord Tenant Non Disclosure Agreement

Movie Non Disclosure Agreement

Mutual Confidentiality and Non Disclosure Agreement

Non Disclosure and Confidentiality Agreement

Product Development Non Disclosure Agreement

Real Estate Buyer Non Disclosure Agreement

Sample Non Disclosure Agreement

Software Development Non Disclosure Agreement

Trade Secret Non Disclosure Agreement

Unilateral Non Disclosure Agreement

Volunteer Confidentiality and Non Disclosure Agreement

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    NDA Laws

    There are a few laws related to the NDA that must be kept in consideration.

    Below, it has been explained how non-disclosure agreements are negotiated by different states and laws:

    Defend trade secrets act

    Under 18 1836 of the United States Code, the Defend Trade Secrets Act requires the owner of a “trade secret relevant to a product or service” used in more than one state to bring the case to the proper district court. Before the passage of this law on May 11, 2016, all non-disclosure violations used on a national scale had to be pursued on a state-by-state basis. Now that this legislation has recently taken effect, a violator of confidential information can be kept responsible in a more reliable way via the federal court system.

    State laws

    Below are various states in the United States and how they govern an NDA:

    Jurisdiction

    The Jurisdiction clause specifies the state’s laws that will apply to the non-disclosure agreement. Suppose classified information is leaked or improperly used by one party, and a complaint is filed. In that case, the regulations of the agreed-upon state will apply, and any proceedings or hearings will be held in that state. Be informed that NDAs are treated differently in different states. Non-compete provisions, for example, are not honored in California.

    Violations of NDA

    If there is a breach of the NDA, the person who leaked information can be held liable for legal costs, depending on the seriousness of the breach. If a party violates an NDA, the offended party should first submit a Cease and Desist Order telling the violator that they are breaking their agreement. This does not mean that they will not face disciplinary action, but it does prevent them from using or spreading the information further.

    The next stage is to assess if the offended party was affected by the confidential information in more than one state; if so, the violator could be prosecuted in a district (federal) court under the Defend Trade Secrets Act. If not, the complainant must file a lawsuit in their respective state court.

    Frequently Asked Questions (FAQs)

    What should an NDA include?

    An NDA should include: The names of the agreement’s parties, a description of what includes confidential information, exemptions from confidentiality, a description of how the knowledge to be released would be put to good use, the time spans involved and miscellaneous provisions

    Is the NDA form available online?

    Yes. The NDA 2021 Application Form is now available online.

    Can a non-disclosure agreement be broken?

    A non-disclosure agreement, like any other contract, can be legally broken or terminated. For example, if the agreement is not legally enforceable, you can violate it and win a lawsuit. You could also agree with the other party to end the contract early.

    Do non-disclosure agreements hold up in court?

    A court would not uphold a non-disclosure arrangement if the information required to be secured, such as trade secrets or client lists, is not necessarily confidential. This rule also applies in situations where another party could develop the information without using confidential data.

    What happens when an NDA is violated?

    If there is a breach of the NDA, the violator is liable for legal costs. If a party violates an NDA, a Cease and Desist Order is presented by the offended party telling the violator that they have violated their agreement. This prevents them from using or spreading the information further.

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