What is a Non-Disclosure Agreement and why you may need one?Noor Tabrizi
At London-based Adam Bernard Solicitors, we care about legal education; therefore, we created a blog post all about non-disclosure agreements; what they are, what they include and how you may need them.
Some of you may have heard of non-disclosure agreements from discussions about celebrities and big corporations. For example, it is a well-known fact that Kris Jenner, head of the Kardashian-Jenner clan, keeps a stack of non-disclosure agreements by the door to protect herself and her family from prying eyes. However, it is not only A-list celebrities that need them for protection; many do not know that even small and start-up businesses can find them extremely useful.
Within typical business operations, there is a lot of risk for the owner. Sharing information is a crucial part of any business. This is an especially major component when seeking investments, looking for potential partners, obtaining new clients, or hiring employees.
We will first tackle what an NDA is and what information you may find in a typical non-disclosure agreement.
What is an NDA?
A non-disclosure agreement is a legal document that helps to keep sensitive information about your business or yourself confidential. Non-disclosure agreements can also come in the form of confidentiality agreements or confidentiality clauses within larger legal contracts and documents.
The impact these agreements can have on commercial relationships is palpable. It promotes trust within the relationship as both parties can feel secure in sensitive information not being leaked.
There are two main types of non-disclosure agreements:
- Unilateral agreements: a contract that binds only one party to the agreement. Most non-disclosure agreements are unilateral. For example, a company may require an employee to agree to not reveal confidential information they learn while working the job.
- Mutual non-disclosure agreements: a contract typically executed between companies and/or people engaged in joint ventures that involve the sharing of information from both sides. This secures the relationship as there is no fear of a party taking their own business knowledge and information elsewhere and creating competition that would work against them.
After discussing what non-disclosure agreements are, the following section will list what they typically consist of.
The Key Elements of a Non-Disclosure Agreement
1. Identification of Parties
A description of the people and businesses involved, including contact information.
2. The document will outline the confidential information in question
It defines what confidential information means and what information is to be confidential. This information could include customer lists and pricing, etc.
3. The scope of the confidentiality obligation by the receiving part
Usually a two-part obligation– both to keep the information confidential, and not to use the information for themselves.
4. Exclusions from confidential treatment
Non-disclosure agreements frequently set out exclusions to the confidentiality clauses. In addition, it should set out who the party can discuss the subject with, such as family and medical professionals.
How could you use a non-disclosure agreement? Some examples…
Now that we have a clear image of what a non-disclosure agreement is and what it entails, the next section will give some examples on when one might be of use.
1. For start-ups, especially those in the fundraising from investors stage, non-disclosure agreements can be used to ensure that their original business ideas are not stolen and shared outside of the meetings.
2. For those with admin staff and personal assistants: these roles in particular handle sensitive and important information surrounding the business, your clients, and yourself. Non-disclosure agreements are vital in creating a secure and comfortable relationship with your support staff.
3. When working alongside other businesses to deliver a service, for example marketing. Marketing professionals require access to brand websites, social media sites and emails. An NDA will help to protect the assets that you have spent money and time curating.
4. For those looking to sell their business, a Non-Disclosure Agreement is vital. In these transactions you are sharing all your information – in essence, showing all your cards for the buyer to decide whether they want to go forward with the deal or not. Unfortunately, many of these potential buyers fall through; it is important to protect your ideas by utilising an NDA within these conversations.
5. You have a unique component to your business; for example, if you are a chef with a signature dish, there may be a secret recipe that would be detrimental to your business if leaked to the wider public and other restaurants. You may have to offer NDAs for your line cooks and assistant chefs to sign.
6. Even simple actions that all businesses carry out such as employing workers puts sensitive information about the running of your company at risk. At London-based Adam Bernard Solicitors, our expert contract lawyers can draft confidentiality clauses into your employment contracts in order to safeguard against this. Learn more This information can include manufacturing processes, client information/lists, sales contacts, profit margins, secret recipes, etc, i.e. anything that sets your business apart from another.
In this section, we have tried to put across that almost all businesses can benefit in some form from the utilisation of non-disclosure agreements.
Non-disclosure agreements are an important legal framework used to protect sensitive and confidential information from being made available to the public forum. Consequences of breaking a non-disclosure agreement can range from relatively little amounts to criminal charges and serious financial penalties relative to the value of profit loss. Therefore, it is extremely important to understand both what you are putting in a non-disclosure agreement as a business, and what you are accepting as an employee.
Therefore, it is important for both business owners and workers to seek independent legal advice when offering or accepting a non-disclosure agreement. Many of these agreements have conditions are not typically picked up or understood by the average reader. At London-based Adam Bernard Solicitors, our expert NDA drafting lawyers can advise both sides: in how to interpret and whether to accept the contract, or what terms to include within the agreement.
Where can you find us?
Adam Bernard Solicitor’s office is located near Upton Park Station, adjacent to the famous West Ham Stadium, with excellent access to the underground and bus routes. If you are driving then there is free parking available at the front and the rear of our office building.
Edited by: Sara Hussain