A non-disclosure agreement (NDA), also known as a confidentiality agreement (CA), confidential disclosure agreement (CDA), proprietary information agreement (PIA), or secrecy agreement (SA), is a legal contract or part of a contract through which the parties agree not to disclose any information covered by the agreement. An NDA creates a confidential relationship between the parties, typically to protect any type of confidential and proprietary information or trade secrets. NDAs are commonly signed when two companies, individuals, or other entities are considering doing business and need to understand the processes used in each others business for the purpose of evaluating the potential business relationship. An employee can also be required to sign an NDA or NDA-like agreement with an employer, protecting trade secrets.
The purpose of an NDA is to protect ideas and information from being stolen or shared with competitors or third parties. Breaking an NDA agreement triggers a host of legal ramifications, including lawsuits, financial penalties, and even criminal charges. NDAs offer a level of protection to businesses so that even accidental breaches are covered.
Some common issues addressed in an NDA include:
- Definitions: This section of the NDA lays out the different types of information covered by the agreement and establishes rules regarding how it is handled. It answers the question of what information is confidential.
- Obligations: What happens if protected information is shared? An NDA not only sets out the specific behavior expected from each signatory, but it also lays out the consequences of breaching the agreement.
- Term: This section outlines how long the NDA will remain in effect.
- Exclusions: This section outlines what information is not covered by the NDA.
- Governing law: This section outlines which states laws will govern the NDA.
- Signatures: This section outlines who is signing the NDA and when it is signed.
In summary, an NDA is a legally enforceable contract that establishes a confidential relationship between two or more parties and protects the information they share from disclosure to outsiders.
