What is Non-disclosure Agreement (NDA)? Different Types of NDAs.

The full form of NDA is Non-Disclosure Agreement. It is an agreement signed between two parties wherein one party wants the other party to keep the information confidential. It is a secret agreement, and parties are legally bound to follow the contract.

In case of a breach of the contract, the party can take legal action and can stop any further discussion. Also, they can sue the other party for all the damages. The NDA protects the interest of the owner initiating the business ideas. Various aspects of the business are protected through NDA, like the manufacturing process, sales plan, and marketing strategy.

Reasons why people may need the NDA?

  • Business ideas have to be unique, and they are highly confidential. So, presenting the new business ideas within or outside the organization needs the NDA.
  • Sharing the business’s financial details with the accountants or with the financial advisors.
  • When the launch of new technology or product is in the initial stage, it needs an NDA.
  • Employees have to sign the NDA, according to which they are not allowed to share any information about an organization with others.

Key elements of NDA

  • Details of both the parties – generally, two parties are involved – disclosing the party and the recipient. NDA should clearly state the availability of the third party and details of both the parties.
  • Term of an agreement – It depends upon the requirement. It may start from one year till ten years. There is no fixed time limit in certain conditions.
  • Details of what is deemed confidential – It depends upon the disclosing party and what terms they want to include in the agreement.
  • Details of exclusion of the confidential treatment – It may have to exclude some points of agreement like information already known to the recipient of the public.
  • Detail of confidential obligation by the parties – It also needs to contain the exemptions. The elements need to be disclosed to the Government or any other authoritative party that requires an exemption in certain situations.

Types of NDA

Standard NDA

One can use the standard NDA in varied business activities like creative activities related to film and web design, sales, partnership, product development, or financial matters.

Mutual NDA

Two parties can sign the NDA if both parties want to share information and expect the other party not to disclose the information. For example, in the case of the financial details, the parties wish to have full confidentiality from each other.

Employee NDA

Every organization wants the secrecy of its process and strategy. The employee NDA generally applies to the employee, consultants, and interns.

Interview NDA

Sometimes, an interviewer may have to disclose sensitive information to the interviewee. The organization can make the interview NDA need to be signed by the candidate to ensure that their data doesn’t leak out.

Scenarios to sign the NDA

  • When the business is entering a new deal.
  • When taking advice or discussing a new product.
  • If planning to invest in new ventures or projects.
  • In case of providing employment.
  • When there is sensitive information, the disclosure to others may harm the party.
  • The information needs to be confidential about the client.
  • Some of the other sensitive information.

Benefits of the NDA

  • It gives a clear idea to the recipient about the confidential matters and the reason for entering into NDA.
  • It legally binds the recipients, an added layer of security in confidential matters. In case of a breach, the recipient party may be penalized.
  • The disclosing party can divide the NDA based on the priority. For example, the party may impose restrictions on the part of the clause for a limited time.
  • The NDA provides total security, and the disclosing party has the right to approach the court or the arbitrator in case of agreement violations.

Extra provisions of the NDA

Employee Solicitation

As per the NDA, the recipient may not be allowed to hire the disclosing party employee for 12 months or 24 months. The NDA implies cases where both parties have the same process in their organization.

Dispute Matters

The parties can sign an NDA from a distant location. According to an agreement, the disclosing party does not need to travel to another state in case of a breach of an agreement. Instead, they can file a claim in the same location.

Protected Rights

The receiving party may get access to the confidential information, but they have no right to demand to become a part of the process or enter into the deal.

Precautions while signing the NDA

  • The disclosing party must ensure that all the personal information needs are clearly mentioned in an agreement.
  • The receiving party needs to be very clear about the clauses before signing an agreement. They must understand their obligations.
  • The disclosing party must ensure that no unfair clause is included in the NDA.
  • None of the clauses should be confused, as it may attract legal bills.

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