An NDA is a legal agreement between parties to keep trade secrets confidential. It defines the information covered, exceptions, time limit, and responsibilities of both parties. NDAs are used in business relationships, mergers and acquisitions, and mutual agreements. Both parties must protect confidential information. It is recommended to read the document carefully and seek legal advice if needed.
A non-disclosure agreement (NDA) is a legal agreement between parties to a relationship in which trade secrets may be exchanged, requiring one or both parties to keep those secrets confidential. NDAs can be written for one or both parties, depending on the nature of the relationship, and some include a clause stating that even the NDA’s existence should be kept secret to avoid attracting attention. Such documents may most commonly appear in business relationships, where companies want to protect proprietary information but also need to share it with select individuals to achieve objectives.
In a typical NDA, the contract defines the confidential information, generating a list of specific topics covered by the agreement and defining any exceptions to the agreement. For example, if a pharmaceutical company is outsourcing the manufacture of a proprietary drug to another company, some employees may need to know the formula. The document must also include a time limit that indicates how long individuals are required to protect information and spells out the expected responsibilities of the party signing it, including the need to take reasonable precautions to protect the confidentiality of information.
NDAs are sometimes used when companies are considering mergers and acquisitions, to prevent information leaking to members of the public or investors. People may be asked to sign such documents when they start working for a company, and these agreements are also seen when business relationships are established between companies and suppliers and subcontractors. In mutual agreements, both parties share confidential information and want assurances about how the information will be handled and processed.
The responsibilities with the NDA are not entirely one-sided. The party with confidential information must also take steps to protect it. If a company fails to protect confidential or proprietary information, parties that have signed an NDA can argue that because the company has already breached the security, they are no longer required to honor the confidentiality claim. Companies must demonstrate their commitment to confidentiality by protecting information appropriately.
When asked to sign an NDA, it is recommended that you read the document carefully to understand what kind of information is covered, how it should be protected, with whom it may be shared under limited circumstances, and how long the agreement will last. If the terms are unclear, the document can be reviewed by a lawyer who can also provide insight into the implications of various aspects of the agreement.
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