Why do you need to use a Non-Disclosure Agreement?
A non-disclosure is needed to protect your business’ confidential information that should not be disclosed to any outside party. There are two types of non-disclosure agreements:
- Unilateral (one-way) non-disclosure – this is where one party is disclosing protected information (employer to an employee). For example, in an employer-employee relationship, only the employee promises to protect the secret information. An investor or potential investor can also use it.
- Bilateral (two-way)/Mutual non-disclosure agreement – this is where both parties are releasing confidential information to each other. This is common in situations like a joint venture or a merger.
When do you need to use a Non-Disclosure Agreement?
There are many types of non-disclosure agreements. Everyday use for a non-disclosure agreement is for an employer that uses an independent contractor. This protects the employer from the disclosure of trade secrets and protected business information. Non-disclosure agreements can also be used when an entrepreneur presents a business idea to a potential investor or lender. Also, if you plan on sharing new technology, a non-disclosure can protect the disclosure of your ideas. Other uses include marketing specialist or blueprints.
Here are some instances of when you may need a non-disclosure agreement:
- Inventions – A non-disclosure in this scenario can protect any ideas or technology you present to another party. This prohibits the party from “stealing” your ideas.
- Independent Contractors – A non-disclosure agreement can protect any information that an independent contractor may need access to from disclosing that information to another party. For example, a marketing specialist. The marketing specialist may work for more than one company. It is crucial that they not use any proprietary business information for another outside company.
- Employees – Employees typically need access to sensitive information to do their job properly. A non-disclosure agreement will protect the company’s trade secrets and prevent the employee from disclosing such confidential information.
- Potential Lenders – A company may seek lenders to ask for a loan for their business. A lender will need information such as a company’s business plan to determine if they want to present your company with a loan. A non-disclosure here also prevents the disclosure of any protected information to any outside party.
What are the main things that go into a Non-Disclosure Agreement?
It is essential to first identify the parties to the agreement. What party will be disclosing the confidential information (employer to employee, company to an independent contractor, company to a lender, etc.)? Next, list any information that you wish to keep confidential. Depending on what industry your company is in, the information you wish to protect will vary. Remember, if the information is public knowledge, it cannot be expected to be kept confidential. The effective date should also be included to document when the agreement officially went into effect.
What are the most common mistakes to avoid?
A good practice pointer is to have the non-disclosure drafted and ready to be presented to a party before the start of the relationship. This protects everything on the front end.
There are some pretty severe consequences of not using a non-disclosure agreement. So, when in doubt, draft it out!
It can be detrimental for a company if one of their employees used all of the business information from your company and started to use your confidential information against you. Not only that, but they will profit from it, causing you to lose money. Just think you have been working on an invention for years and years, and you decide to present it to an investor. Without a valid non-disclosure agreement, the lender may decide they like your idea so much that they want to use it for themselves. A non-compete prohibits the lender from stealing your idea. However, if they sign the non-disclosure agreement and they still use your idea, you are protected and have a legal remedy. Legal remedies for a breach of contract (NDA) include monetary damages, equitable relief (injunction where the court prohibits the breaching party from continuing the activity).
Do I need to use a lawyer, accountant, or notary to help me?
A non-disclosure agreement can be generated quickly and easily on our site without the assistance of a lawyer, accountant, or notary. You won’t need to worry about lawyer fees when you can create a non-disclosure here tailored specifically to your needs. This will save you time and hard-earned money!
What is the easiest way to create a Non-Disclosure Agreement?
You found it! A non-disclosure agreement can be created in a few easy steps on our site. Once you have your information ready, you can proceed to the next steps. We understand your time is precious and want you to have the protection you need. The non-disclosure form can protect your company, ideas, and future business ventures.
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