Free Non-Disclosure Agreement

What is an NDA?

A Non-Disclosure Agreement is a written contract that officially recognizes a legally binding relationship between a Disclosing Party and a Receiving Party.

The Disclosing Party and Receiving Party mutually understand that certain information is sensitive, technical, or nonpublic and valuable for commercial or other purposes.

Further, the two parties promise they will not use or disclose the protected information with anyone else as they discuss and explore the possibility of entering into a business relationship.

A simple NDA Form will identify the following essential elements:

• The “Effective Date”: when the promise of privacy starts
• The “Transaction”: the potential business relationship being explored
• The “Confidential Information”: private, secret, sensitive, or valuable data
• The “Disclosing Party”: the individual or entity sharing information
• The “Receiving Party”: the individual or entity receiving information
• The “Representatives”: other people (i.e., directors, officers, employees, agents, or advisors) who may share, receive, or protect information

For a full briefing, please view our complete list of items and NDA clauses that could be included.

Types of NDA: Mutual and Unilateral

Non-disclosure agreements are commonly used when one or both parties have valuable, confidential, or sensitive information like trade secrets, customer lists, or proprietary know-how.

To turn a great idea into cash flow, both parties consciously share personal information to explore a possible collaboration or business relationship.

Two major types are used to protect confidential information:

Non-disclosure agreements can also be tailored for specific scenarios, including:

• Employee – The employee version of this agreement is used to notify a company’s employees that they are not to discuss specific business information outside of work. For businesses to protect their valuable information, this document helps employees acknowledge that examining sensitive data breaches their contract.

• Interview – It’s possible that in some interviews, it is necessary to reveal sensitive information. In these cases, companies should consider having their interviewees sign an agreement before the job interview.

• Inventor – Inventors can use this agreement to protect their unpatented inventions. Inventors may find themselves in situations where they need to discuss their project with an interested party. In this case, it’s important that the inventor can ensure that this third party will not relay any information elsewhere after the meeting.

• Real Estate – In the real estate community, this agreement protects the buyer, seller, broker, and anyone involved in a property transaction. As real estate sales include disclosing significant personal and financial information, having an NDA ensures privacy and prevents the involved parties from brokering secret deals.

• Trade Secret – With this type of NDA, companies can confidentially disclose their trade secrets to third parties without fear of theft. This protects information such as unique formulas, practices, instruments, software, technical designs and blueprints, and customer lists.

Be sure to choose the most appropriate type of NDA for your situation.

When Do You Need an NDA Form?

If you are unsure about what to do if you are asked to sign an NDA, consider these five things:

1. The document’s scope: Understand the main questions the NDA is asking you to do. What type of information are you required to keep confidential? What steps must you take to keep it confidential? How long will the NDA last?
2. Look for broad language: Be wary of general language that doesn’t relate to the information you already have personal or public knowledge of. Otherwise, you are handcuffing yourself and opening yourself up for greater liability.
3. Liquidated damages: Run if you see a liquidated damages provision. A liquidated damages provision ensures that if you breach the NDA, the company or employer will be entitled to a specific amount of damages without ever having to prove you caused actual harm to them.
4. The consequences of breaching it: Look to see if there are any unusually harsh or unfair punishments should you breach the NDA. If the sentence is disproportionate to the breach, hold off on signing.
5. You can negotiate: Always ask to modify the document if you find something unjust or out of place. It can’t hurt to ask, and companies are more likely to allow changes when the NDA is last-minute.

The Consequences of Not Using One

Someone else may profit from your once-in-a-lifetime idea or confidential information without a valid NDA.

Problems Caused by Not Using a Confidentiality Agreement

As a legally enforceable agreement, this document can help alleviate genuine concerns that someone may leak your confidential information or use that valuable information for their economic advantage.

What Should be Included in the NDA

A simple confidentiality agreement should generally have at least the following:

1. Who is on the hook? (the “Parties”)

The Disclosing Party, either a person or a company, usually has valuable information they want to share with the Receiving Party to explore a potentially fruitful business relationship (i.e., the “Transaction”).

Both parties should sign and date the document, for it becomes legally binding.

You may consider adding a confidentiality clause in their employment contract if hiring employees.

2. What is protected? (the “Confidential Information”)

Any data or information that is private, secret, sensitive, or valuable will be saved.

Confidential information can include:

Exclusions define what kind of information is NOT protected by the agreement and include:

• publicly known or available information (i.e., Google or USPTO website)
• non-confidential information shared by someone else besides the Disclosing Party (i.e., a third party) to the Receiving Party
• information that can be shared with permission from the Disclosing Party
• information independently developed by the Receiving Party
• information the Receiving Party must share because of a lawsuit

3. What is the duration? (the “Effective Date” and “Disclosure Period”)

The agreement should also spell out when the promises to protect information begins (the “Effective Date”) and the duration the protected information must not be shared with others (the “Disclosure Period”).

Usually, the parties agree to when the term of the agreement will end (the “Termination” provision). For example, the Agreement could terminate whenever:

• the Agreement expires
• the Transaction is completed; or
• a specific amount of time has passed.

4. Where does the agreement apply? (the “Jurisdiction”)

If confidential information is leaked or inappropriately used by one party and a disagreement grows into a lawsuit, the parties should agree that one state’s laws will apply. In other words, both parties consent to appear in a specific state.

It is essential to know that some states like California encourage employees to be entrepreneurial, so the laws there disfavor non-compete clauses (also known as a “covenant not to compete” or CNC) and employment agreements restricting an employee’s mobility after leaving one company.

5. What other details should be included in a confidentiality agreement?

• Disclaimer: the protected information is provided “as is” and is not necessarily accurate or complete
• No License: the Agreement does not give either party any patent, copyright, or other rights to the information provided
• Non-Disclosure: the Receiving Party promises not to let others know that
  • the Disclosing Party has shared or used Confidential Information
  • a Transaction is being discussed or negotiated
  • a Transaction has taken place, including the details of the relationship
• Obligations: the Receiving Party and its Representatives promise to
  • not share or use the protected information with others
  • protect the security and confidentiality of the protected information
  • prevent any unauthorized access, use, or disclosure of information
  • reasonably safeguard the information’s confidentiality (“need to know”)
  • return or destroy any documents after the Agreement ends
  • tell the Disclosing Party ASAP if the protected info is disclosed or lost
• No Obligation: either party may:
  • reject any proposals related to the business relationship
  • walk away from negotiations at any time and for any or no reason
• Remedies: if either party breaks their promise to one another
  • no amount of money may be enough to make it ever “right” again
  • injured party may ask the court to order the other party (not) to do something (i.e., specific performance, injunction, or equitable relief)
  • the injured party will go after both money and non-money damages
  • whoever is in the wrong will need to pay attorney fees
• Non-Solicitation: either party may prevent the other from soliciting or offering employment to the other party’s employees or from diverting business away from the other party
• Notice: if at any time one party needs to tell the other something important (i.e., their computers were hacked and the Confidential Information was stolen or someone has sued them in court), then such notices should be sent to a specific person, email address, or mailing address

You may also require that such notices be delivered by a particular method:

1. Delivery in person
2. Overnight courier service
3. Certified or registered mail
4. Postage prepaid
5. Return receipt requested