In this help guide we explain the main terms and key considerations in a typical non-disclosure agreement (NDA).
There are four common types of NDAs: a standard NDA, a mutual NDA, an employee NDA and an independent contractor NDA. Besides the mutual NDA, each of these agreements is unilateral, meaning that one party is giving confidential information and the other party is receiving that information and agreeing to keep it secret. In a mutual NDA (a.k.a. bilateral NDA), both parties agree to keep each other’s information confidential.
The employee NDA and independent contractor NDA are specific NDAs meant for the employer-employee and client-contractor relationships, respectively. The standard NDA should be used for other situations where one party is unilaterally disclosing confidential information—for instance, if one party is disclosing proprietary business plans, information regarding a potential sale or contract or confidential information about an invention or other intellectual property.
Note that the name of the parties in your document will change depending upon the type of NDA you select. For instance, standard and mutual NDAs use a “disclosing party” and a “recipient”, while the employer and contractor NDAs use an “employer” and “employee”.
Our document defines "confidential information" and "trade secrets" in a way that maximises the protection of your proprietary information. The recipient of the confidential information is obligated to use his or her best efforts to safeguard the information against improper disclosure or theft. If the recipient realises that confidential information has been improperly disclosed, he or she must immediately put the disclosing party on notice.
When creating the agreement, you will have the choice to specify additional information that must be kept confidential beyond the general categories of information automatically protected by the agreement. While this is optional, it is a good idea to specify specific information or types of information that you know will be disclosed under the agreement and that need to be protected. Including this helps communicate the parties’ expectations upfront in order to hopefully avoid potential disputes in the future. However, it is recommended that you first review the definitions of "confidential information" and "trade secrets" in order to know what is already protected under the agreement.
The recipient’s obligations under the agreement may continue for as long as is necessary to protect the disclosing party’s information. Depending upon your situation, this might only last for a month or it could continue indefinitely. However, it is recommended that you limit the length of the agreement to as little time as is required to protect the parties’ legitimate business interests. This will help to avoid any challenges to the legitimacy of the agreement.
Typically it is best to include a disclaimer of warranties regarding the confidential information and trade secrets. This means that the party disclosing such information cannot be held liable if the information disclosed is inaccurate, misleading or does not meet the recipient’s expectations. However, you probably would not want to include this disclaimer if the disclosing party has made express written promises to the recipient that the information is accurate or will be used in a specific way.
It is normally recommended that you include a mediation and/or arbitration clause. This means that disputes must be settled through mediation or binding arbitration. The advantage here is that it helps avoid the significant time and cost of using the formal court system.
You will also need to choose which country’s laws will control the agreement. Typically, the disclosing party uses the country where its principal place of business is located. Otherwise, you might want to use the country where the parties are conducting business together or where the disclosing party was incorporated.
You then have the option to include any extra terms or conditions you wish. This enables you to further customise the agreement according to the parties’ needs and circumstances. For instance, you may want to include any express promises made between the parties. Still, it is recommended that you first review the text of the document to see what terms have already been included for you.
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