Non-disclosure agreement

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Non-disclosure agreement (NDA), also known as a confidentiality agreement (CA), confidential disclosure agreement (CDA), proprietary information agreement (PIA), or secrecy agreement (SA), is a legal contract or part of a contract between at least two parties that outlines confidential material, knowledge, or information that the parties wish to share with one another for certain purposes, but wish to restrict access to or by third parties. It is a contract through which the parties agree not to disclose information covered by the agreement. An NDA creates a confidential relationship between the parties to protect any type of confidential and proprietary information or trade secrets. As such, an NDA protects non-public business information.

Overview

NDAs are commonly used when parties are considering a transaction or negotiation and need to understand the processes or secrets of the other party to evaluate the potential business relationship. NDAs can be "mutual", meaning both parties are restricted in their use of the materials provided, or they can be unilateral, meaning only one party is making the commitment to protect the other's information.

Purpose

The primary purpose of a non-disclosure agreement is to prevent the possibility of proprietary information being leaked to competitors or the general public. It also serves to legally bind the parties to confidentiality obligations, thereby creating legal recourse in the event of a breach. Information typically protected by NDAs might include, but is not limited to, schematic drawings, computer code, marketing strategies, manufacturing processes, and customer lists.

Types of NDAs

There are several types of non-disclosure agreements, including:

• Unilateral NDA: The most common type, where one party agrees not to disclose certain information.
• Bilateral NDA: Also known as a mutual NDA, where both parties agree not to disclose information they learn from each other.
• Multilateral NDA: Involves three or more parties where at least one of the parties expects to disclose information to the others and requires that the information is protected from further disclosure.

Key Elements

A comprehensive NDA should include the following key elements:

• Definition of Confidential Information: Clearly defines what is considered confidential.
• Exclusions from Confidential Information: Identifies what is not considered confidential.
• Obligations of the Receiving Party: Outlines the duties and responsibilities regarding the handling of confidential information.
• Time Periods: Specifies the duration of the NDA's validity.
• Governing Law and Jurisdiction: Indicates the legal jurisdiction that will govern the agreement.

Enforcement

Enforcement of NDAs depends on the legal system of the jurisdiction in which they were entered into. Breach of an NDA is usually handled through legal action that could result in monetary damages or an injunction to prevent further breaches. The enforceability of NDAs varies by country, and in some cases, certain types of information may not be eligible for protection.

Controversies

While NDAs are an essential tool for protecting sensitive information, they have been subject to criticism and controversy, particularly when used to suppress whistleblowing in cases of illegal activity, harassment, or discrimination. This has led to calls for legislation to limit the use of NDAs in such circumstances.