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How to make a Non-disclosure agreement

A non-disclosure agreement (also known as a 'confidentiality agreement') is a legal contract that offers protection where two or more parties will be disclosing confidential information to each other.

Preserve confidentiality when two businesses exchange commercially sensitive information by using this mutual confidentiality agreement. This two-way non-disclosure agreement (NDA) offers protection when two businesses want to share information with each other but need to ensure the information goes no further. This mutual NDA allows you to get to know each other better so you can decide whether to enter into a longer-term deal or partnership.

Use this NDA:

  • when you want to exchange confidential information with another business (or individual)
  • to impress upon the other party the value of the confidential information
  • to impose requirements about the protection of your confidential information

This non-disclosure agreement covers:

  • definition of confidential information
  • protection of confidential information
  • who is allowed to receive confidential information
  • non-circumvention
  • disclosures required by law
  • termination of this agreement 
  • remedies if there is a breach of confidentiality

Common situations where you may need to use an NDA include:

  • bringing in a consultant
  • talking to potential partners
  • hiring an employee

Asking the other party in these situations to sign an NDA protects any sensitive information you may share. An NDA protects this information by stating that anything confidential that is shared between the parties will not be shared with others (except in prescribed circumstances). If this information is shared then there will be reparations (eg damages).

Almost any type of information can be confidential information. You can protect both commercial information and personal information. Examples of confidential information include, but are not limited to, trade secrets, patents, products, designs, databases, recipes, drawings, client's information or lists.

When drafting a confidentiality agreement you must state the purpose of creating the NDA (the disclosure) to the other party. This is also called the permitted purpose. The purpose of disclosing the information must be legitimate and for specific reasons. You must describe the purpose of disclosure as clearly as possible (eg for the purposes of exploring a joint venture between the parties).

Information is not deemed to be confidential if it:

  • is already known to the party receiving the confidential information at the time of its disclosure
  • is known to the public
  • comes into the possession of the receiving party from a third party who did not violate any contractual or legal obligations himself by disclosing this information
  • is required to be disclosed by law or rules of any court

A non-circumvention clause, such as the one contained in this NDA, prevents the recipient of confidential information from going directly to the disclosing party’s suppliers or clients with the intention of bypassing the disclosing party and thereby harming the disclosing party’s business. For more information, read Non-circumvention clauses.

The period of time for which each party must keep the information confidential will vary depending on the circumstances. Confidentiality agreements can be terminated immediately by giving written notice or can automatically terminate after a set amount of time. When using a Rocket Lawyer NDA template automatic termination can occur after 1, 3 or 5 years. You should set a realistic time period for the duration of the agreement as information can lose its confidential character or commercial value over time.

Remedies are available when there has been a breach of confidential information. The remedies available for breaching a confidentiality agreement are proportionate to the wrong done. A successful claimant in an action for misuse of confidential information is entitled to a percentage of profits that have resulted from the misuse of information, damages and, or an injunction.

Ask a lawyer for advice:

  • if any of the parties are based outside England, Wales and Scotland

This confidentiality agreement is governed by the law of England and Wales or the law of Scotland.

Other names for Non-disclosure agreement

Confidentiality agreement, Non-disclosure contract, NDA.