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A Non-Disclosure Agreement (NDA) is a legally enforceable contract that establishes confidentiality between two parties—the owner of protected information and the recipient of that information. By... Read more

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Making a Non-Disclosure Agreement

  • What is a Non-Disclosure Agreement?

    A Non-Disclosure Agreement (NDA) is a legally enforceable contract that establishes confidentiality between two parties—the owner of protected information and the recipient of that information. By signing an NDA, participants agree to protect confidential information shared with them by the other party. In addition to not divulging or releasing the information without consent, the recipient also agrees not to copy, modify, or make use of the information in any way that is not authorized by the owner.

    Cases in which confidential information might be protected through an NDA can include:

    • Business models to be presented to a venture group for possible funding.

    • Plans for a new tool to be produced by a fabrication shop.

    • Information about clients or customers for a specific company.

    • Lab workers who have access to test results before patients.

    • Embargoed news releases or reviews.

    • NDAs are an almost surefire way to confirm that confidential information stays protected in a variety of situations. It's important to be aware of how these legal agreements work before signing or creating a document, as being well informed can help you make the best legal decisions now and down the road.

  • What is the purpose of a Non-Disclosure Agreement?

    A signed Non-Disclosure Agreement (NDA) can help you avoid a lot of problems as a business owner. Without an NDA in place, your confidential information can be disclosed publicly or otherwise used by employees, vendors, clients, or anyone else with whom you share the information. A Non-Disclosure Agreement lets the recipients of your proprietary information know that you expect confidentiality and it authorizes you to take legal action if the contract is violated.

    Confidentiality agreements typically serve three key functions:

    1. NDAs protect sensitive information. By signing an NDA, participants promise to not divulge or release information shared with them by the other people involved. If the information is leaked, the injured person can claim breach of contract.

    2. In the case of new product or concept development, a confidentiality agreement can help the inventor keep patent rights. In many cases, public disclosure of a new invention can void patent rights. A properly drafted NDA can help the original creator hold onto the rights to a product or idea.

    3. Confidentiality agreements and NDAs expressly outline what information is private and what's fair game. In many cases, the agreement serves as a document that classifies exclusive and confidential information.

    Confidential information typically can include items such as:

    • Business records and plans.

    • Financial information.

    • Trade secrets and original research.

    • Inventions and product ideas.

    • Technical data or designs.

    • Contract details or partner lists.

    • Sales leads and customer or client details.

    • Pricing or discount structure.

    Confidential information generally does not include:

    • Information that is already public knowledge.

    • Information lawfully received from a third-party.

    • Information that is independently developed or discovered by the recipient.

    • Information that the owner has already given the recipient consent to disclose.

    • Any other information that both parties agree in writing is not confidential.

  • How do I write a Non-Disclosure Agreement?

    You can customize the Rocket Lawyer NDA template in minutes. Here's what should be included in an NDA:

    Parties to the agreement

    • The owner of proprietary information and the recipient.

    • Either party can be an individual or a company.

    Confidential information details

    • The definition for what is considered confidential information.

    • The reason why the confidential information is being shared.

    Additional terms

    • Non-circumvention requirements (which protect an owner from being bypassed in a business transaction).

    • Timeframe of confidentiality.

    Definitions of confidential information spell out the categories or types of information covered by the agreement. This specific element serves to establish the rules-or subject/consideration-of the contract without actually releasing the precise information. For example, an NDA for an exclusive designer's clothing boutique might include a statement such as this: 'Confidential information includes customer lists and purchase history, credit and financial information, innovative processes, inventory and sales figures.

    Non-Disclosure Agreements also exclude some information from protection. Exclusions might comprise information already considered common knowledge or data collected before the agreement was signed.

    Additionally, NDAs explicitly spell out that the person receiving the information is to keep it secret and limit its use. This means you can't breach the agreement, encourage others to breach it, or allow others to access the confidential information through improper or unconventional methods. For example, if a designer from a computer company leaves a gadget prototype at a bar where it's discovered by a technology reporter, the designer would likely be in breach of the NDA he signed when he took the job.

    Time periods are also commonly addressed in NDAs and usually require that the party receiving the information stays mum for a number of years. This specific information is usually up for negotiation.

    As a Rocket Lawyer Premium member, you can access, edit, and copy your NDA template using any device. Your completed document can also be electronically signed or downloaded in PDF or Word format. If you make additional edits directly to the document, it is recommended that you have a lawyer review your changes.

  • Is an NDA legally binding?

    While a properly executed NDA form is usually enforceable, there are a few key considerations to keep in mind if you want to take a dispute to court:

    • Does your state have protections against unreasonable or overly broad scopes?
    • Was the information shared accidentally (e.g. overheard, hacked or otherwise stolen?)
    • Is the information well-known or easily findable?
    • Can the process or product easily be developed without access to your information?
    • Do you have proof that the recipient of the information was the true source of the leak?
    • Can you prove that the release of information actually caused monetary or other types of damage to your company?

    Even the most simple confidentiality agreement can benefit from attorney review. If you have questions about the enforceability of your Non-Disclosure Agreement, ask a lawyer.

    Legal resources for a Non-Disclosure Agreement: 48 CFR § 227.7103-7

  • How long should an NDA last?

    Generally, the time period is limited to as long as the confidential information is considered useful. Depending on the nature of the information that was exchanged, a shorter or reasonable amount of time, like one year, may be more legally enforceable. However, information like trade secrets may benefit from being kept confidential for an indefinite amount of time.

  • What happens if you break a Non-Disclosure Agreement?

    Breaking an NDA is the same as breaking any other contract, however there are certain legal exceptions. Generally speaking, you may legally break a Non-Disclosure Agreement if there is a misrepresentation of material fact (hiding or fabricating important details in the contract) or if illegal activity is involved. If you are considering breaking any legal contract, it is usually best to talk to a lawyer beforehand.

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