A non-disclosure agreement (NDA) is a legally binding contract that establishes a confidential relationship between two parties. Both parties agree that sensitive information will not be shared with anyone else.
There are several types of NDA’s.
Firstly, a Universal NDA. Also known as one-way NDAs, they only require one party to disclose its confidential information to the other party. They are the most common type of NDA, and you will come across them whenever companies need to disclose confidential information to employees, advisors, clients, partners, and other stakeholders.
Employer/employee NDAs are the most common, and restrict employees from sharing company information such as:
- Trade secrets
- Business and development plans
- Pricing data
- Supply sources
- Operation plans
- Merchandising systems
- Technical information such as projections and inventions
A Bilateral NDA requires both parties to disclose confidential information to each other. These types of NDAs are commonly used during corporate takeovers, joint ventures, and mergers and acquisitions.
A Multilateral NDA involves three or more parties where at least one of them will disclose information to the other parties. Multilateral NDAs are often used in complex business deals.
How enforceable is an NDA?
To be enforceable, an NDA must be properly drafted and signed. If an NDA is too vague and broad, as well as being unclear in its aims, it could be unenforceable. The NDA must include what is defined as confidential information, who cannot disclose it, and how long it’s active for. Breaching an NDA leaves you open to lawsuits, and you could be required to pay financial damages and legal costs.
How long do NDAs last?
In theory, an NDA can last forever. For example, there is an NDA used to protect the Coca-Cola recipe, and it has been in place for more than 100 years. Most NDAs last for as long as the agreement states in its terms, and that can be for as long as each party agrees.
It’s important to remember that to be enforceable, an NDA must be drawn up correctly. To make sure you get this right, you need expert legal advice.
GLG Legal can advise you on every aspect of non-disclosure agreements, as well as all the day-to-day issues relating to your business. Contact our office today for a consultation.