A non-disclosure agreement is also referred to as an NDA or a confidentiality agreement. In any business practice, there may be situations where you may want to share some confidential information with another party. Confidential information can include sensitive data and trade secrets. You cannot be truly confident in whom to trust, but you can safely do so with a non-disclosure agreements. That way, you can be sure that the other party will respect the information’s secrecy and confidentiality. They will also be prevented from endangering your business.
When do you need an NDA?
There are many situations where non-disclosure agreements may be appropriate, if not necessary. The main instances primarily include situations in which you share something valuable about your idea or business. And you would therefore want the assurance that the other party will not use it without your approval or steal it.
That said, NDA’s might be inefficient for start-ups trying to raise funds with help from venture capital investors, as these investors will refuse to sign them.
Making a non-disclosure agreement
You can find templates online, and you can use them to draft your own. Make sure that they have the following elements included:
- Identification of the parties involved
- The definition of confidential information
- The scope of the receiving party’s confidentiality obligation
- Exclusions from the confidential treatment
- The agreement’s terms
You may also consider additional provisions that could make sense to the non-disclosure agreements your business will require. These are employee solicitation, injunction, jurisdiction in case of a dispute, and no rights in the receiving party.
Things you should avoid when making NDAs
Beware of these pitfalls when drafting or making non-disclosure agreements:
- Clerical errors and typos – The smallest mistakes could make the legal document invalidated, so make sure all details are correct, and there are no mistakes.
- Poorly defined confidentiality – Make sure that the confidential information is defined explicitly.
- Failing to define penalties and enforcements – The other party must know that there are consequences if they break the agreement.