A non-disclosure agreement (NDA) is a contract that is made between two parties and is legally binding. An NDA outlines which material in a shared process is confidential and which information, therefore, should not be shared for any other reason other than within the transaction that is taking place. A non-disclosure agreement is designed to stop third parties accessing information that, if shared with them, could give them an advantage. Below is some important information you should know about NDA.
Just about anything can be covered by an NDA
There’s no real limit to the information that we can be covered in an NDA. Anything that is knowledge and particular to a company can be considered confidential. This could include customer lists, patent, test results, passwords, technical or system specifications, ideas, customer profiles or anything else.
Just like business insurance protects your company against financial loss in the day of trouble, an NDA is there to cover a company against losing out if anything private is shared.
Developing a solid NDA for your business without spending a fortune
You don’t need to spend a fortune to get an NDA. Legal freshers can prepare one for very little fees, as long as you provide them with the information they need. The value of an NDA far outweighs the cost in most cases, and you can get an NDA for even just a few hundred pounds if it is a simple document.
Think about the details of the NDA carefully
You really need to consider what is provisioned and detailed in your NDA. You can’t enforce anything that isn’t included within the scope of the document, and you can’t be too broad to cover every possible thing. You need to make sure that it is enforceable yet comprehensive.
You should have a central provision in the NDA and include things such as the term, will, duration, what constitutes private information and exactly what level of disclosure and to whom stakeholders can communicate certain information.
When should you have an NDA?
There are some pretty obvious situations where they are required. For example:
- If you are presenting an idea to have an investor, distributor or partner.
- If you are sharing financial marketing information with a prospective buyer.
- If you are sharing vital business information with an outsourcer or freelancer.
- If you are showing a product to a potential buyer or licensee.
Make sure things are enforceable
We already mentioned that an agreement is worth the paper it’s written on unless it isn’t enforceable. You also need to make sure that it is clear what happens if any stakeholder violates the nondisclosure agreement. Will you litigate immediately or will there be financial consequences?
Clearly detailing the consequences of a breach make it far more enforceable and more likely that stakeholders will stay within the parameters of the NDA.
It can be a real pain to enforce an NDA
Although it is really important that you have an NDA, going to court and enforcing a breach can be a very tedious process. Also, the breach of the agreement could have serious consequences for you or your company, and the damage may already have been done.
You must maintain a good relationship with the people that you share the data with and try to act professionally and courteously and to enable people to do likewise with you.
Agreements around confidentiality are an important part of business as they protect intellectual property. They aren’t expensive to get produced, and they can add a level of professionalism to your transactions, as well as protecting you against people with nefarious intentions.