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Key Provisions of Non-Disclosure Agreements

On Behalf of | Apr 5, 2022 | Business Law

We are sometimes hired to draft non-disclosure agreements (NDAs), which are contracts establishing a confidential relationship in which the parties agree that sensitive information obtained during the course of the business relationship should not be disclosed to any third parties.  Simply said, NDAs allow parties to communicate information while reducing the danger of it being misused as a result of the sharing. The NDA is mutual (or “two-way”) when two parties share sensitive information with each other.  Employees are frequently required to sign non-disclosure agreements (NDAs) to protect their companies’ proprietary information. It’s vital to remember that an NDA isn’t a substitute for a non-compete agreement.

Because NDAs serve a variety of objectives, it’s critical to figure out whether a mutual or unilateral (one-way) NDA is best for the situation. The receiving party’s use of the sensitive information will usually be limited to a specific designated purpose. As a result, the NDA’s objective and definition of what is considered secret information should both be clearly specified in the NDA, giving the parties a clear knowledge of how the confidential information can be used, what can be disclosed, and what must be kept confidential.  It’s important to note that neither party to the NDA is required to enter into any type of business partnership just by exchanging information.

Another key factor is the length of the NDA. Long-term agreements may limit the parties’ ability to pursue other business opportunities, rendering the NDA unenforceable in court. The recipient’s obligation to protect any of the discloser’s confidential information for a reasonable period of time is normally one to five years.

It is critical to determine whether any third-party representatives of the parties, such as attorneys, consultants, investors, and others, will require access to the confidential information during due diligence activities prior to closing a deal, and, if so, to ensure that they are adequately bound by the agreement’s obligations.

In order to help enforce remedies against violations, an NDA should establish a well-detailed method of relief. The disclosing party, for example, may demand that the receiver return or delete any sensitive information in their possession, and then affirm in writing that the confidential information has been destroyed or returned. The right to obtain formal injunctive remedies in the case of a breach of the NDA is a frequent method.

In conclusion, having a well-drafted NDA prepared by your business attorney creates the conditions and confidence necessary to disclose sensitive information with other strategic business partners, contractors, and/or vendors. As a result, the parties may more accurately estimate the potential rewards and risks of potential collaboration or business deals.

Contact attorney David Frangos of Frangos Legal LLC if you would like to discuss a new or existing Non-Disclosure Agreement. Schedule a consultation and case review by emailing us at [email protected], by telephone at 317-348-2150, or by booking online.