Non-Disclosure Agreement (NDA) Template

A non-disclosure agreement (NDA) is a contract between two parties in which one party shares confidential information and the other promises not to disclose it. Confidential information is often sensitive, technical, commercial, or valuable in nature (e.g., trade secrets or proprietary information). Both parties sign the NDA, creating a binding contract to keep the information secret.

Non-Disclosure Agreement – By State

Types of Non-Disclosure Agreements

Table of Contents

• Non-Disclosure Agreement - By State
• Types of Non-Disclosure Agreements
• What Is a Non-Disclosure Agreement?
• Purpose of a Non-Disclosure Agreement
• When to Use a Non-Disclosure Agreement
• Is an NDA Legally Binding and Enforceable?
• What Should an NDA Include?
• How Long Does an NDA Last?
• How to Enforce an NDA
• Consequences of Breaking an NDA
• Sample Non-Disclosure Agreement

What Is a Non-Disclosure Agreement?

A non-disclosure agreement (NDA) is a legally binding document that creates a confidential relationship between the disclosing and receiving parties. It prevents the receiving parties from revealing sensitive information to unauthorized third parties. The parties entering this agreement refer to it to understand the terms under which they must keep the outlined information private.

Purpose of a Non-Disclosure Agreement

The purpose of an NDA is to keep trade secrets, confidential information, and proprietary information safe from unauthorized disclosure. This document encourages open communication by allowing the parties to freely share important information knowing that the other party won’t misuse it.

An NDA also clarifies confidentiality obligations, secures intellectual property, protects trade secrets, and provides legal recourse in case one party breaches its promise. It sets the legal framework to protect intellectual property and information from being stolen, sold, or shared with third parties, such as business competitors.

When to Use a Non-Disclosure Agreement

Situations when a company may use an NDA include the following:

• Business negotiations: An NDA protects proprietary information that parties share during negotiations to enter a potential partnership, joint venture, acquisition, or merger.
• Employment: Employers may require employees to sign an NDA to safeguard confidential business information that the employee has access to while they work.
• Contractor and vendor relationships: An NDA prevents contractors and vendors with access to sensitive information from disclosing it.
• Product development: Using an NDA when sharing details about new products or innovations with potential collaborators and investors helps prevent idea theft.
• Franchising: An NDA protects the franchisor’s proprietary business model, strategies, and processes when they share opportunities with potential franchisees.
• Startups: Startups often use NDAs when pitching to investors to protect their proprietary technology, financial projections, and business plans.

For example, in a business context, imagine a startup tech company, InnoTechHive, developing a groundbreaking software solution. Before entering into discussions with potential investors, InnoTechHive requires them to sign an NDA to safeguard their proprietary algorithms and business strategies.

By signing the NDA, the investors agree not to disclose or use any confidential information shared during the discussions for their own benefit or to the detriment of InnoTechHive. This ensures that the startup can freely discuss any innovative ideas without fear of intellectual property theft, preserving its competitive advantage in the market.

Is an NDA Legally Binding and Enforceable?

Yes. NDAs are enforceable once signed. However, the following conditions must be true:

1. The parties mutually agree to all its terms.
2. The NDA provides a clear definition of the confidential information that the receiving party must not disclose.
3. The parties created the NDA for a legitimate purpose (i.e., not to conceal illegal activity).
4. The NDA specifies a reasonable scope and duration.
5. The NDA contains some type of consideration. For example, the consideration can be the mutual exchange of sensitive information.
6. All parties must enter the agreement willingly and have the legal capacity to do so.

If these conditions are true, the agreement is enforceable. The parties can pursue legal action and seek appropriate remedies if the other breaches the terms.

What Should an NDA Include?

Here are the key elements that an NDA should include:

• Parties involved: Name the disclosing and receiving parties. The “Disclosing Party” is the individual or entity sharing information. The “Receiving Party” is the individual or entity receiving information.
• Transaction: Explain the potential business relationship that the disclosing and receiving parties want to enter.
• Confidential information: Define confidential information for your specific agreement. You may define all information the disclosing party shares as confidential. Alternatively, you can define it only as information specifically marked as “Confidential” or information relating to a specific topic, such as “Accounting Information” or “Customer Information.”
• Specific exclusions: State when the obligation of confidentiality will not apply. For example, it may not apply if the information is already in the public domain, the receiving party already had access to the information before signing the NDA, or the information is independently developed by the receiving party.
  • Furthermore, the obligation doesn’t apply if the receiving party has prior written consent to disclose the information.
• Obligations: Explain the receiving party’s obligations. For example, you may require them to maintain specific security processes and procedures to keep sensitive information confidential. You may also require them to refrain from mentioning they’re discussing or negotiating a transaction with the disclosing party.
• Non-compete clause: Decide if you want to include a non-compete clause in which you limit the receiving party’s work relationship with competing companies.
• Non-solicitation clause: Restrict the receiving party’s ability to solicit employees or independent contractors from the disclosing party.
• Termination date: Determine when the agreement will end, whether it be upon the consummation of the “Transaction” or after a certain length of time passes. You can also state that the agreement will end when the parties write and sign a separate written agreement.
• Remedies: Stipulate the consequences of breaking the NDA
• No license: Explain that the NDA doesn’t give either party any patent, copyright, or ownership of the information provided.
• Severability: State that if one part of the NDA is ruled invalid in court, that part will be removed, and the rest of the agreement remains valid.
• Amendments: Explain that either party can amend the NDA if they acquire a written agreement with both parties’ signatures.
• Jurisdiction: The jurisdiction clause establishes which state’s laws govern the NDA. Suppose confidential information is leaked or inappropriately used by one party, and a lawsuit ensues. In that case, the laws of the agreed-upon state will apply, and any trials or hearings will occur there.
• Signatures: Your NDA needs to include the signatures of all parties and their representatives. Representatives are other people (i.e., directors, officers, employees, agents, or advisors) who may share, receive, or protect the information in pursuit of the transaction specified in the NDA.

How Long Does an NDA Last?

An NDA can last several months to years, depending on the sensitivity of the information shared and the parties’ agreement. Both parties should agree on a timeframe that accounts for the protection of sensitive information and practical business considerations.

Some NDAs can be indefinite if the parties’ arrangement involves an ongoing relationship or the value of a highly sensitive trade secret lasts indefinitely. However, it’s best practice to let the NDA expire after a specific period. This way, the receiving party can’t argue that the agreement is unreasonable or overly restrictive.

How to Enforce an NDA

Step 1 – Review the NDA

Review the NDA to confirm that the disclosing party has committed a breach. Ensure that their obligations haven’t expired and that they didn’t disclose information within the guidelines in the document.

Step 2 – Gather Evidence of the Breach

Gather evidence of the breach to prove it occurred. Examples of potential evidence include unauthorized letters, emails, social media posts, publications, file transfers, or data downloads. Confirm that the evidence shows a clear misuse or unauthorized disclosure of the information involved.

Step 3 – Assess the Breach’s Impact

Evaluate the breach’s impact on your company’s operations or interests. This way, you can understand the extent of the damage and decide what remedies to seek.

Step 4 – Notify the Receiving Party

Notify the receiving party of the breach. Use a cease and desist letter to demand they stop sharing the information or unpublish specific data. Sometimes, a simple reminder can be enough to get them to comply.

Step 5 – Seek Mediation or Arbitration

If your NDA includes specific dispute resolution procedures, follow them. Start with mediation, as you may be able to resolve the dispute with a mediator to facilitate the discussion. You may also try arbitration to engage a third party who can reach a legally binding decision.

Step 6 – Seek Legal Action

If you can’t resolve the breach with mediation or arbitration, talk to an attorney with experience in contract law. You may be able to prepare a complaint and file a lawsuit. If you win, you may be awarded remedies, such as injunctive relief or monetary damages.

Step 7 – Update the NDA

Review and update the NDA to enhance its clarity and address any uncertain provisions. Update the writing process for future NDAs to prevent similar breaches in the future.

Consequences of Breaking an NDA

Here are the potential consequences of breaking an NDA:

• Monetary damages: The original disclosing party may seek monetary compensation for any financial losses the breach caused. This monetary compensation may include punitive, consequential, or direct damages.
• Injunctive relief: A court may order the original receiving party to stop disclosing the private information.
• Specific performance: A court may order the original receiving party to comply with the NDA’s terms.
• Legal fees: The original receiving party may have to pay legal fees and costs incurred by the original disclosing party.
• Damaged reputation: The original receiving party may experience a decline in their professional reputation.
• Loss of business opportunities: The breaching party may lose current and future business opportunities because of the contract breach.
• Re-negotiation: The original disclosing party may terminate the NDA, requiring the receiving party to re-negotiate a new agreement.

Sample Non-Disclosure Agreement

Download a free non-disclosure agreement template in PDF or Word format below:

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