A Mutual Non Disclosure Agreement is an agreement under which two or more parties agrees not to disclose proprietary and confidential information ("Confidential Information") that they share with each other. This type of agreement may be useful in a variety of circumstances. For example, two companies might choose to share information on how to improve their on-line sales through promotions on each other's websites. In such a situation, each company would probably be sharing information about their pricing and promotion methods and would want to protect this information from disclosure to third parties. The document is written to protect both parties. It defines rights and obligations based on which party is disclosing information and with party is receiving the information. Either party may take either role, depending on the Confidential Information being shared. Some typical provisions that are included for the protection of the disclosing party include the following: - No Warranty. There is a possibility that the Confidential Information could contain mistakes or errors, or be based on assumptions that later prove to be incorrect. Therefore, it is common to include a "no warranty" provision that specifies that the disclosing party will not be responsible for any damages that the receiving party might incur from using the Confidential Information.
- Risk of Disclosure. In addition to the "No Warranty" provision, the document may also provide that any disclosure made by the receiving party of any information is at the receiving party's risk. Because the document already states that accuracy of the information is not warrantied, the receiving party will bear the risk of using the information in violation of the agreement. For example, if the receiving pary acts on some of the information and the information was inaccurate, the receiving party cannot hold the disclosing party responsible for the harm caused by the inaccurate information.
- Limited License. Generally, both parties intend that the Confidential Information will only be used for the limited purpose of reviewing the information and becoming familiar with each other's business to determine whether the parties might have interest in future transactions (based on some additional agreement). A "limited license" provision makes it clear that the parties are not acquiring the right to use the Confidential Information on a general basis.
- General Provisions. A Mutual Non Disclosure Agreement should include provisions that (i) require amendments (changes) to the agreement to be in writing and signed by both parties, (ii) specify the state whose laws will govern and interpret disputes between the parties regarding the matters covered by the agreement, and (iii) may prohibit the parties from assigning their obligations under the agreement to third parties. Generally, the state whose laws should govern the agreement should be the state where one of the parties is located.
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