An Easy Guide to a Non-Disclosure Agreement

When more than a pinky promise is needed to protect sensitive information, a non-disclosure agreement is the way to go. Business Kitz have written this handy blog to explain what exactly a non-disclosure agreement is!

What is a non-disclosure agreement?

A non-disclosure agreement (NDA) signals a confidential relationship in which two or more parties are contractually, legally bound to uphold confidentiality and thus, you may have also heard this kind of agreement referred to as a confidentiality agreement. It’s pretty much a really serious pinky-promise, but involving contracts and legal consequences, instead of two fingers earnestly entwined. We see these agreements arise when businesses enter negotiations with other businesses, as a means of establishing trust, unity and confidentiality. 

What are the benefits of non-disclosure agreements?

Non-disclosure agreements are a helpful precautionary measure for protecting any sensitive information the company may disclose, which is not in the interest of the company to be shared with the public. They are usually incredibly clear in defining what can and cannot be disclosed to avoid any confusion for involved parties. Further, such agreements assist in maintaining confidence and facilitating mutual trust when dealing with new people or external businesses.

When are non-disclosure agreements initiated?

Businesses most commonly initiate NDAs when they are entering negotiations with another business, in order to preserve their own interests and keep the details of the deal confidential. This measure helps protect sensitive information from reaching competitors. As a result of the agreement, all involved parties are forbidden from disclosing information relating to the businesses process or plans to any outsider. 

Alternatively, in some companies, NDAs can be part of protocol for employees to sign upon employment, in order to ensure any sensitive information they become privy is protected. 

We also see non-disclosure agreements enacted in negotiations discussing investment prospects or fund-seeking processes. 

What is included in a NDA document?

Most NDAs include standard elements, albeit customised to suit the varying purposes of an agreement. The core elements each agreement possesses, include:

  • Names of the parties subject to the agreement;
  • A definition of what constitutes confidential information in this instance;
  • Any relevant exemptions or exclusions from confidentiality;
  • An outline of the appropriate uses of any sensitive information revealed;
  • The time periods involved; and
  • Miscellaneous provisions.

To assist in the preparation of non-disclosure agreement, Business Kitz have available a Privacy and Confidentiality Policy Template kit, which includes a template for non-disclosure agreements. This can be accessed as part of our subscription plan, which is priced at $14 per month, per user.

We recommend that you are as detailed as possible in your NDA, to ensure that expectations are clear. 

What is the difference between mutual and non-mutual non-disclosure agreements?

Mutual disclosure agreements:

When both parties benefit from the sensitive information shared under the protection of an NDA, it can be termed as a mutual non-disclosure agreement. 

Non-mutual non-disclosure agreements:

A non-mutual non-disclosure agreement can refer to the aforementioned agreement some employees are obliged to sign upon employment. These agreements ensure that any sensitive information disclosed in relation to the company is protected. As the employee is the only party required to sign the agreement, it is a non-mutual agreement. 

What happens if an NDA is breached?

As an NDA is a legally binding contract, there can be serious legal implications if violations occur. If either party breaches the guidelines of the NDA, the other party may wish to pursue court action to halt further disclosures, or may even attempt to sue the offending party for monetary damages. 

Legal advice

If you require further assistance regarding non-disclosure agreements, our sister company, Legal Kitz, can help! They specialise in employment-related matters and offer a FREE 30-minute consultation to assist with any of your queries. Additionally, our subscription plan offers employers access to over 150+ legally compliant, employment, and HR-related document templates to take away the hassle regarding the legalities of being an employer. Click here to find out more about our subscription plan.

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