When businesses and individuals share sensitive information with third parties, they need assurance that it will remain secret. Such shared information may include valuable details about trade secrets, the company’s strategies and plans, client information, and intellectual property, which, if leaked, can result in considerable losses.
Non-disclosure agreements obligate anyone receiving such information to keep it confidential and prevent unintended use. Employees with access to classified company information often sign non-disclosure agreements to safeguard their employer’s interests. It’s also common for businesses to sign non-disclosure agreements (NDA) when working together. However, anyone can use these documents to safeguard information they deem sensitive.
Non-disclosure agreements can be designed for general or specific uses. You may adapt a general non-disclosure agreement to fit your needs. Preparing a general NDA is straightforward. Here is a look at what it should contain and how to prepare yours when needed.
Who Needs a Non-Disclosure Agreement?
Anyone sharing valuable or sensitive information that requires discretion may benefit from signing a confidentiality agreement.
- Businesses: NDAs help during mergers and acquisitions (M&As) when parties share information. These usually require two-way (bilateral) NDAs because both parties disclose information they need to be protected.
- Employers: Organizations hiring new employees require that these keep company secrets. Having them sign an NDA ensures they protect the information they access.
- Legal matters: Parties in a lawsuit who decide to settle matters outside court often use NDAs to deter either from sharing the settlement terms.
- Individual entrepreneurs: Small businesses can also benefit from NDAs. These agreements allow them to protect budding ideas and business processes.
What Are the Contents of a General Non-Disclosure Agreement?
Before creating a non-disclosure or confidentiality agreement, ensure you have all the necessary information. Every NDA is different but requires at least the following information.
The confidential information
It should clearly state the confidential information that will be shared, be it contacts, trade secrets, or strategies. Before drafting, you should be transparent about the information you wish to protect.
Exclusions to the confidential information
Understand which information is excluded. You must draw a line between what’s confidential and what’s not.
Obligations
Ask yourself, what do I want from the receiving party? The NDA should outline how the information can and cannot be used and establish secure handling guidelines.
Timelines
Some NDAs last decades. You should have a clear timeline with a start and end date when the NDA applies.
When you have all the information you need, you are ready to start drafting the NDA.
How to Write a General Non-Disclosure Agreement
Non-disclosure agreements are legally binding. The receiving party must treat shared information as a secret, and the disclosing party must create a comprehensive document that captures all necessary details and clauses to achieve that. Drafting a general non-disclosure agreement doesn’t take long.
- Identify the disclosing and receiving parties
Any NDA usually involves at least two parties. As shown in the template, including the full legal names of each person or entity entering into the agreement is crucial. It makes them liable to the contract terms.
- Commencement date
State the date when the NDA becomes binding. If you are sharing highly sensitive information, setting a start date before it’s shared is vital to protect it. The information may no longer be confidential if you share secrets before signing an NDA.
- Describe the “confidential information”
In this section, define information that’s considered confidential. It should include a detailed definition. Vague descriptions can be confusing and may lead to disputes.
- Outline exclusions
The chances of the receiving party having some information on the subject are high. Therefore, the NDA must contain some exclusions to what is considered confidential. For example, any knowledge they have before the NDA or that they independently discover is not “confidential.”
- Duration
Decide how long the NDA stays active. Employees, for example, may be required to keep private information confidential years after they stop working for a company. Specify whether the NDA should last a year, ten years, or a lifetime.
- Explain the receiving party’s obligations
The receiving party often has the most responsibility. This section will probably constitute the bulk of your NDA, depending on how many clauses you must include. Explain policies that are in place to achieve this. For example, you may have a specified channel for sharing company information, strict delete-by dates, and other measures to ensure unauthorized persons cannot access confidential matters.
- Include permitted disclosures
Specify circumstances that may allow for disclosures. Some instances may be when fellow employees need the information to complete a task or when the receiving party must speak with legal representatives. Not allowing for necessary disclosures can work against the company’s goals.
- Consequences of a breach
Breaching an NDA is not generally considered a crime unless specific criminal activities are involved. Therefore, the court will rely on the consequences spelled out in the contract. State whether monetary compensation will suffice and how damages will be measured. Also, specify the laws and jurisdictions that will apply in case of breaches.
- Additional clauses
Tailoring your NDA to your needs may require additional clauses, such as severability, waivers, and return or destruction of confidential information.
- Signatures and dates
The disclosing and receiving parties should both sign the NDA in agreement with its terms.
Information can mean the future of your business. Protecting your investment starts with a valid NDA. Use our free template to draft your Non-Disclosure Agreement. Our website also offers other legal documents and templates for businesses and individuals.
Article by
Dena StandleySenior Writer | Experienced Paralegal | 79 Articles
Dena Standley is an experienced paralegal based in Houston, Texas and has over a decade of experience working as a paralegal with trial lawyers and law firms. She is passionate about making legal processes more accessible and helping people understand and navigate complex legal matters with confidence.
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