What is a Non-Disclosure Agreement?
In the business world, it is common to reach agreements that guarantee the confidentiality of business information. Companies have an interest in protecting the information that they exchange with other companies or that is in the hands of their workers, to avoid that it ends up in the hands of third parties and may cause unprofitable situations.
When drafting a Non-Disclosure Agreement, the interests of a company or a person are being protected, with the Non-Disclosure Agreement templates ensuring that the information that is collected within that contract may not be revealed by the signatories of the same.
What is a Non-Disclosure Agreement?
An NDA (Non-Disclosure Agreement or contract) is a document that contains a series of conditions and is intended to ensure that the information shared between the parties is not communicated or disclosed to a third party.
Why sign a Non-Disclosure Agreement?
There are many reasons why it can be interesting to sign a confidentiality contract to protect the information and interests of the company.
When establishing a business relationship with another company or entity, secrets, action protocols, financial data, metrics, industrial property, own procedures and other information about the personalized business model are revealed.
For this reason, it is important to sign a Non-Disclosure Agreement that protects all this information in the event that said business relationship is broken or terminated, establishing legal security.
When negotiating with potential investors, the Non-Disclosure Agreement is an important tool to prevent theft or appropriation of ideas or business models.
Another of the main uses of a Non-Disclosure Agreement is between the company and its workers to ensure that secrets or relevant information about third parties are not revealed.
What should a Non-Disclosure Agreement Include?
The content of a Non-Disclosure Agreement must include six fundamental parts so that it includes all the important points of this type of agreement:
In this part the information of the persons or entities that intervene in the confidentiality agreement. will be collected, will share information and undertake to maintain confidentiality and not reveal any data to third parties.
Object of the Non-Disclosure Agreement
The purpose of a Non-Disclosure Agreement is to protect information from being disclosed to outside agents. For this reason, the agreement must indicate what information will not be shared and how it can be used (it is important to indicate what use can be made of the restricted information).
Period of Duration
A Non-Disclosure Agreement must have a specific duration, so the time during which the information to which it is the subject cannot be disclosed must be included in the contract.
The NDA must include what the sanctions or penalties are in case of non-compliance. These sanctions must be fair and proportional in relation to the damages caused by the disclosure of the information. This is a deterrent clause to prevent the breach of the agreement from going unpunished.
Resolution of the Agreement
In this part of the confidentiality contract, it will be indicated what causes cause its validity to end, as well as the legal framework that is applicable to the agreement.
Signatures of those Involved
The confidentiality agreement is concluded with the signature of the parties involved, giving their express agreement on the conditions and clauses of the agreement.
The Non-Disclosure Agreement may also include other clauses that may be interesting depending on the type of business relationship or the business sector to which it belongs. An assignment prohibition clause can be included to prevent either party from assigning the rights and obligations of the Non-Disclosure Agreement to a third party.
What use can be made of Confidential Information?
When a confidentiality agreement is drawn up, the object of the agreement must include, apart from the information that cannot be disclosed, the use that can be made of said information. It is important to extend and specify the use that can be given to the information so as not to create delicate situations where a correct use of the information may be blocked by the Non-Disclosure Agreement.
How Long does a Non-Disclosure AgreementLast?
A Non-Disclosure Agreement cannot be indefinite, since from the legal point of view it does not comply with the law. Not even industrial patents can be registered indefinitely. That is why one of the points that must be included in the confidentiality contract is a specific period of time, to provide confidentiality to the information during it.
Who is Affected by a Confidentiality Agreement?
Depending on the context of the signed Non-Disclosure Agreement, there are two types of contracts:
Unilateral Non-Disclosure Agreement
These types of agreements with unilateral effects oblige only one party to keep confidentiality of the information shared, for example, companies use this type of agreement with their employees to protect business secrets, client portfolios or other relevant information.
Bilateral Non-Disclosure Agreement
Confidentiality contracts with bilateral effect oblige both parties to keep the data or information contained in the agreement confidential.
The Non-Disclosure Agreement is a document of value before the courts of justice, so signing this type of agreement gives companies a degree of protection over their secrets and important business information.
The confidentiality agreement is governed by the agreements contained in the document signed by the parties, so it is important to draft it properly, including the main points that must be included, such as the parties involved, the object of the contract, the duration, the penalties, the resolution of the agreement and of course, the signature of the parties giving their agreement to what is contained in said agreement. The confidentiality contract is a very useful tool in the day-to-day business relationships of the company.