In business, there are numerous instances in which you have to share confidential information with another party. For example you have a business idea. In order to execute the idea you will have to share the idea with potential partners, investors or employees.
Startup companies with a new and profitable idea can only succeed if what they are working on remains under wraps. But the key to doing so safely is making sure that the other party is bound to respect the confidential information you provide them and not use it in a way that is detrimental for your business.
Inorder to keep a lid on the sensitive information, a non-disclosure agreement, or NDA, alternatively referred to as confidentiality agreements (CA), confidentiality statements, or confidentiality clauses is signed between two parties.
A Non-Disclosure Agreement is typically put to use while disclosing confidential information to potential investors, creditors, clients, or suppliers. Some people might not like the idea of signing a non-disclosure agreement saying “Don’t you trust me?” But without such a signed agreement, any information disclosed in trust can be used for malicious purposes or be made public accidentally. NDA is a promise between two or more parties that the information conveyed will be maintained in secrecy.
The confidentiality of the information is maintained for a specified period of time as mentioned in the agreement. But once the information is made public, that loses it’s “confidentiality” people will be free to disclose the information.
Types of Non-Disclosure Agreements:
The specific content of each Non-disclaimer agreement is unique as it will relate to details of specific information, proprietary data involved and what is being discussed. In general there are two types of non-disclosure agreements.
- Unilateral Non-disclosure agreement: A unilateral agreement binds only one party to the agreement for example a company signs a unilateral non-disclosure agreement with an employee. Employee agrees not to disclose or reveal confidential information learnt while on the job. The majority of NDAs fall under these category and are intended to protect a business trade secret. Researchers and professors at research universities or at R&D department in the private sector are at times required to sign an NDA before they carry out research with the business or university that supports them.
- Mutual non-disclosure agreement: A mutual non-disclosure agreement is typically executed between two parties exploring a possible business arrangement or a joint venture or some other possible merger that might have a mutual benefit to both parties.