What is a Non-Disclosure Agreement

Legal Article

What is a Non-Disclosure Agreement

A non-disclosure agreement is a contract that binds two or more parties to a confidential relationship. Furthermore, one or both of the parties in the relationship agrees that any sensitive information shared during the length of the partnership, employment, or agreement will not be shared with other businesses, individuals, or governmental agencies. Thus, a non-disclosure agreement protects confidential business or personal information from being disclosed to any other party while giving one or both entities ways to receive damages in the case that the agreement is breached in any way.

In addition to restricting one or all of the members in the relationship from disseminating the confidential information, many non-disclosure agreements will also restrict how the parties involved in this agreement use the confidential information during the agreement.

What is in a Non-Disclosure Agreement

The clauses and information covered by non-disclosure agreements can change depending on the specific situation where it is used. However, below are a few general pieces of information that every non-disclosure agreement contains:

  • The length of time that the agreement applies to
  • The names of the parties to the agreement
  • A statement of the appropriate uses of the information to be revealed
  • A definition of what constitutes confidential information in this case
  • Any exclusions from confidentiality
  • Miscellaneous provisions

Defining Miscellaneous

The miscellaneous provision refers to general information such as state laws, other laws that apply to the agreement, or if a dispute occurs, what party will pay the attorney fees. Though the miscellaneous clause may not directly relate to the information that necessitates the non-disclosure agreement, it is important to understand this provision as it could have a direct impact on the enforceability of the agreement as well as financial implications if the contract is breached.

Additionally, a non-disclosure agreement is extremely malleable both in what it covers as well as how the document can be created. For example, a non-disclosure agreement can be a stand-alone document, or it could simply be one of many clauses included in a larger contract.

What are Common Uses for a Non-Disclosure Agreement

With more companies relying on proprietary information or trade secrets to sustain success, non-disclosure agreements are becoming increasingly common. Below are some of the most common situations where a non-disclosure agreement may be necessary:

  • While applicable in most situations, non-disclosure agreements are most commonly used between businesses that enter into a partnership or joint venture and want to ensure that any of their proprietary information discussed during the agreement is not shared with competitors or the public.
  • Some companies also require that new or current employees sign a non-disclosure agreement if that employee is or may have access to or work with sensitive information about the company or the product and services that the company offers. The most common reason why an employer would have their employees sign a non-disclosure agreement is that the company hires or works with inventors, deals in research or product development, or has specific employees that work with sales data or customer lists.
  • Another common use of a non-disclosure agreement is when companies need to hire independent contractors to work on a specific project. Because of their nature, independent contractors typically work with company or customer sensitive information that, if leaked to the public or competitors, could negatively affect the company.

Other Important Non-Disclosure Agreement Uses

  • Companies also commonly employ non-disclosure agreements when they are seeking funding from individual investors or financial institutions. In many cases, a company may be seeking financial backing in order to develop a new product or service. However, to secure the capital necessary to make this idea a reality, the company must divulge product secrets. By using a non-disclosure agreement, you ensure that no potential investor can steal your idea or discuss it with competitors.
  • A common yet often overlooked area that non-disclosure agreements can be used is when a business employs another company. For example, a business may need to hire a manufacturing business to create a new product. However, the company will want to ensure that the manufacturer does not give its design to a competitor. Additionally, a company may hire an office cleaning service whose workers are alone in the office at night. In this case, a business can keep confidential information out and not have to worry about cleaners sharing intellectual property.
  • Finally, you can use a non-disclosure agreement during litigation or a form of alternative dispute resolution. In many disputes, both parties must share confidential information to move the case forward. Thus, a non-disclosure agreement ensures that any confidential information that a party shares is not discussed outside of this setting.

What to Do if Someone Asks You to Sign a Non-Disclosure Agreement

Whether you are entering a business partnership or are an independent contractor, you will likely sign a non-disclosure agreement. Furthermore, a larger contract can include a non-disclosure agreement provision. Thus, be on the lookout for headings such as “Non-Disclosure,” “Confidentiality,” or “Confidential Information.”

Many companies will use a general non-disclosure agreement that may include provisions not applicable to your specific case. Thus, you must review the terms of the agreement to ensure that you can fulfill all of the contractual obligations.

Furthermore, if you are the one with confidential information, review the contract very carefully. The reason for this is that certain entities may use a confidential heading. However, the body of this provision instead states that the company does not have to keep your information private.

Final Thoughts

Whether you are the party with the confidential information or the entity employed by the company with this information, seeking legal advice before entering into a non-disclosure agreement is extremely beneficial. The reason for this is that an attorney can review the contract or provision. This ensures that the agreement encompasses the necessary information or is not overly restricting one of the parties. At Antonoplos & Associates, we have over 20 years of experience advising, representing, and acting for clients pertaining to non-disclosure agreements. Thus, we have the knowledge and experience required to assist any business, contractor, or individual with non-disclosure agreements.

Contact Our DC Law Office for More Information

Finally, for more on what is a non-disclosure agreement, contact us at 202-803-5676. You can also directly schedule a consultation with one of our skilled attorneys. Additionally, for general information regarding business and contract law, check out our blog.