Non-Disclosure Agreement (Mutual)
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Think of a non-disclosure agreement as a way of asking two parties to keep each other's secrets. It's a relatively simple concept that protects your company's confidential information from being bandied about. Take a look at how to put an NDA together and where to find a free template to give you a head start.
A non-disclosure agreement, otherwise known as an NDA, protects any confidential information that is disclosed between parties. It's an agreement between the parties that none of this confidential information will be used for any reason, except those that are specified in the agreement.
There are two different types of non-disclosure agreements. An agreement in which just one party is disclosing confidential information is known as a one-way non-disclosure agreement. If both parties are disclosing confidential information it's known as a mutual non-disclosure agreement. Both documents are used in similar situations where either or both parties want to protect certain information.
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A one-way non-disclosure agreement should be used when one business wants to share sensitive and confidential information with another party. This can be for a number of reasons such as highlighting the value of the disclosed information and to impose restrictions on the use of the information, but ultimately it's put in place to protect the business's confidential information.
A mutual or two-way non-disclosure agreement should be used when two parties agree to share confidential and sensitive information with each other. This can be used at the start of a potentially long-term relationship between the parties and shows willingness from both sides to commit to a partnership and protect each others' confidential information.
No matter whether it's a mutual or one-sided agreement, an NDA must include the following to make sure confidential information is safeguarded.
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Both an NDA and a non-compete agreement serve the same purpose – to protect a party's confidential information. Whereas an NDA takes place between two businesses or individuals hoping to enter into a partnership or contract together, a non-compete agreement only arises between an employer and its employee.
A non-compete agreement is where an employee signs an agreement that states that he or she will not work for another company in the same industry for a certain period of time after leaving. This is so that the employee cannot use his expertise gained with the company to help a competitor gain an advantage.
A non-disclosure agreement is one of the most powerful and effective tools used to protect confidential information and prevent the misuse of it. Unfortunately, the terms of an NDA can be difficult to enforce in certain situations. This is why most legal professionals will advise that before entering into an NDA with a party, you should carry out extensive due diligence on the receiver to make sure that they are unlikely to breach your agreement.
With so much at stake if you get certain clauses wrong in an NDA, it's highly recommended that you do ask a lawyer to look over your non-disclosure agreement. Every company has a unique set of confidential information, with different terms required. You can draft it yourself from scratch or use a non-disclosure agreement template before seeking help from a legal professional to make sure that you've included everything you need.
Before you begin writing an NDA, it's worth having a good brainstorm about any trade secrets, intellectual property or confidential information that you want protected. From here, it's relatively easy to put together your document, following these guidelines.
You can do this with a simple paragraph that names both parties involved and defines exactly what "confidential information" means in this agreement. For example, is it technical information, financial information, customer databases or something different? In the same section, you should highlight what non-confidential information is; for example, information that is already public or known by the other party.
It's essential to define the obligations of the receiving party including the circumstances in which the party can use, and sometimes even disclose the confidential information. Here, a start and end date should also be established, in which the information can be exchanged between the parties. This usually coincides with the start and end date of a contract or partnership. A second timeframe should be written that defines a period for confidentiality, which is normally between 5 and 10 years.
An NDA should clearly outline the consequences of a breach of confidentiality (e.g. monetary penalties or termination of a contract) as well as methods of resolution (e.g. court proceedings or an ADR).
An acknowledgement section at the bottom of your document should be signed by all parties involved, stating that they understand their obligations and the terms set out in the non-disclosure agreement.
It'll come as no surprise that non-disclosure agreements can be tricky documents to get right, especially if you haven't had much experience in legal writing before. That's where a non-disclosure template might come in handy. Here's where to find some online.
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