Key Takeaways
- NDAs establish confidential relationships and allow for the sharing of information with reduced risk of wrongful disclosure.
- Businesses entering negotiations may sign NDAs.
- Employers can require employees to sign NDAs in order to protect confidential company information.
Full Text
Non-disclosure agreements, or NDAs, are cost-effective and generally short-form legal documents that establish confidentiality in business or other relationships. NDAs serve as an agreement that sensitive information will not be made available to others. The language in these documents can clarify specifically what must be kept a secret and outlines the potential consequences should there be a breach of contract.
NDAs are common for businesses entering negotiations with other businesses as they allow parties to share information without fear that it will end up in the hands of competitors or out in the public domain. Typically, parties are classified as “discloser” or “receiver” parties, and it is vital that each “receiver” party signs an NDA. When only one party will be disclosing confidential information, the other party may sign a “one-way” NDA which represents that it will be bound by the terms of the NDA. When both parties will be disclosing such information, the parties typically sign a “mutual” NDA which applies the obligations of the NDA to each party.
NDAs can also typically be found in employment documents for employees who come into contact with their employer’s confidential information. For many startups and other businesses, all employees sign NDAs.
When considering the use of an NDA, startups may wish to consult with a startup lawyer who can assist with drafting or review of NDAs.
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