The primary purpose of non-disclosure agreements (NDAs) is to protect proprietary information. In many cases, companies have a personal stake in safeguarding essential data regarding products or work practices, as the information could be valuable to competitors.
Accordingly, it is crucial that NDAs contain key elements, which will ensure they provide comprehensive protection. Here are a few vital components companies should include.
Parties bound by the agreement
An NDA can be either unilateral or bilateral. Unilateral NDAs cover only one party, meaning that party cannot disclose confidential information described in the contract. Bilateral NDAs prevent both parties entering into the contract from making such disclosures. Contracts can also include others who may access confidential data, such as attorneys or accountants.
Description of confidential data
When describing protected information, NDAs should be as specific as possible. When definitions are broad, there is a higher risk of contract breach since the definition of confidential information might not be entirely clear.
Length of obligation
Length of obligation can vary greatly from business to business. It is possible to draft an NDA with an indefinite obligation, but this can be problematic from a legal perspective. Accordingly, those creating the NDA should consider how long it will be before protected information becomes public knowledge. In this case, the NDA length should be comparable in scope.
The contract must also specify preferred legal remedies in the event that a breach occurs. The contract may call for a restraining order to prevent additional unauthorized disclosures beyond the original breach. When an NDA exists between multiple parties, then subsequent restraining orders will apply to all involved parties.
NDAs are very useful, but they must contain the right elements to offer the best protection. The clearer these documents are, the lower the risk of a breach occurring.