A non-disclosure agreement (NDA) refers to an agreement between two or more parties regarding information that is deemed confidential between the parties. A non-disclosure agreement is also known as a confidentiality agreement (CA), confidential disclosure agreement (CDA), proprietary information agreement (PIA), or secrecy agreement. All of the listed agreements specifically refer to legal contracts between the parties with legal repercussions should they be broken. Most commonly, non-disclosure agreements are signed between two or more companies, individuals, or other entities (such as partnerships) when entering into business together or forming a business relationship. NDAs can also be required of employees by their employers.
Types of Non-Disclosure Agreements
There are two types of non-disclosure agreements, known as unilateral and bilateral non-disclosure agreements. The latter refers to non-disclosure agreements where both parties are supplying information that must remain secret (not disclosed to the public), and both parties have a mutual interest in keeping disclosed information private. This type of agreement is most common when businesses are merging. In some cases, a lawyer will suggest that parties enter a bilateral nondisclosure agreement simply for the purpose of keeping the business fair.
A unilateral non-disclosure agreement, on the other hand, refers to a situation in which one party wants to disclose information to another party, but prefers for that information to be kept secret. Unlike a mutual nondisclosure agreement, only one party is putting forth secretive information. This type of agreement is more common when dealing with patent laws, or if an employer has a business practice that he / she does not want employees to disclose.
Information Protected in Non-Disclosure Agreements
Within a non-disclosure agreement, the information that cannot legally be disclosed is dependent upon the individual party or parties. The non-disclosure information can contain any information, material, or knowledge that is not publicly or typically known. Most non-disclosure agreements contain the sensitive information not to be disclosed, terms of the agreement, including the time-frame in which the agreement remains legitimate, and consequences for violations of the agreement. Of course, nondisclosure agreements are not valid without all signatures of the parties involved.
Legal Repercussions of a NDA Violation
The consequences for violating the non-disclosure agreement should be outlined within the signed non-disclosure agreement between parties. Most commonly, however, violation of non-disclosure agreement involves the party whose information was disclosed seeking an injunction against the disclosing party, suing for damages, pressing criminal charges, or all of the above. Violating a non-disclosure agreement is illegal under state and federal law.
In understanding the legal rights regarding a non-disclosure agreement, it is prudent to understand that NDAs only protect information that regards the signing parties and is directly divulged by the signing parties. For example, if business A and business B enter into a non-disclosure agreement, but then business A discovers information about business C that is pertinent to business B, business A has the right to disclose the information about business C as it was discovered by an outside source. This type of disclosure cannot be prosecuted against.
For more information about non-disclosure agreements, and whether or not you should sign or pursue one, particularly as a business owner, visit: http://www.sba.gov/community/blogs/community-blogs/business-law-advisor/make-sure-your-business-information-stays-sec-0. This website outlines tips for business owners and provides sample non-disclosure agreements.
Chip Dalton writes on business law, commerce, contracts, civil procedure and other assorted topics. Chip recommends that those who need legal assistance procure an experienced firm such as Shrader Law.
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