Is an NDA a Type of Contract?

Confidentiality is becoming a matter of paramount importance in a world of rapidly evolving technology and a competitive marketplace. Therefore, many entrepreneurs consider drawing up a special nda agreement, because it is a key element in business cooperation. It is a legal document that guarantees the participants to keep important information confidential.

What is a Non-Disclosure Agreement (NDA)?

A non-disclosure agreement (NDA) is a contract that is legally enforceable. It is also known as a confidentiality agreement. Its essence is that one party gives secret information to the other and the other party agrees not to share it with third parties for a certain period of time. The main reason for using this type of agreement is to protect data about your own product or other intellectual property from being leaked. The agreement can also specify what information can be shared with others.

Such a document is usually signed when entering into a business relationship with a particular person or even an entire company. The data that is specified in it can be unlimited. You can include all the information about your company in the agreement or only the part that concerns the production of a new product. You can also sign such contracts to protect any other data, such as research results or customer lists. If information is leaked, the agreement has been breached and one party’s obligations have been violated. As a result, the party will have to fulfill several conditions spelled out in the agreement, such as paying compensation and penalties.

To create a non-disclosure agreement, you can use nda agreement templates, which includes the following:

• basic information about the parties to the agreement;
• defining what will be considered classified information;
• specifying the duration of the agreement;
• making exceptions for information that can be shared with third parties.

One of the examples when such agreements can be used is when two companies or individual entrepreneurs jointly develop certain products. In this case, it will protect one of the parties to the transaction in case of information leakage. Another option is to sign an agreement between a company and investors. For example, you are looking for sponsors who can support the realization of your product. By signing a non-disclosure agreement, they will be able to access the data they need to make a decision, but will not use it for personal purposes. In addition to this, it is recommended that you sign a contract that deals with a non-competition agreement. It is important, because such a contract will prevent investors from using the information obtained for some benefit.

The Main Types of Non-Disclosure Agreements

There are several types of non-disclosure agreements that are most commonly signed. These include contract options such as:

• unilateral;
• bilateral;

It is necessary to analyze each of them in detail to understand the difference between them.

Unilateral Agreements

Using nda template to create these types of contracts, the most common are those where only one party agrees to disclose confidential information to the other. They act like a unilateral contract where only one party must remain silent. Some of the most common examples of such agreements are located below:

• between an employer and an employee: it is prohibited to share business information with third parties;
• with a contracting company: not allowing hired people to obtain business data;
• with an inventor-appraiser: it is forbidden to misappropriate or pass on information about a new product to others;
• between a seller and a buyer: a restriction on the buyer’s disclosure of information that he may learn during the sale of certain goods.

It is extremely easy to create this kind of contract. You can make one yourself or use nda sample, which can be found on the Pandadoc website.

Bilateral Agreements

These contracts may be called differently, such as reciprocal agreements. They prohibit any of the participants from disclosing the information spelled out in the contract. This can be either general data or confidential information of one of the parties.

Most often, bilateral non-disclosure agreements are used in situations where two people or companies exchange a rather impressive amount of business information during negotiations. Such situations may arise when firms are sold or merged.

Multilateral Agreements

These are agreements where three or more parties are involved. Confidential information may be specified by one or all of them. The importance of such a document is as clear as possible – the protection of personal information in cooperation with many people.

The main advantage of trilateral agreements is that the company or individual entrepreneur eliminates the need to conclude unilateral or bilateral contracts. Instead of having to sign a contract with each employee, a common agreement can be created that is equally enforceable.

Pros and Cons of Non-Disclosure Agreements

Undoubtedly, the main advantage of this type of contract is that all of your confidential information is kept secret. You protect yourself from the possibility of its transfer to third parties, as well as from the financial damage that such actions can cause. Anything can be used as the subject of the agreement – possible future patents, various materials and knowledge about the company and other confidential data.

In addition to the advantage described above, there is another list of pros of a non-disclosure agreement:

• clarity about what data is classified and what data can be shared with outsiders;
• low cost of creation;
• outlining the consequences of data disclosure (fines, etc.).

If we talk about the minuses of such contracts, the most obvious is that cooperation with a company or individual entrepreneur begins with a certain distrust in him. If some individuals understand the entire necessity of such a step, others take it on their own account. Other disadvantages include:

• the risk of scaring away talented professionals;
• the possibility of deteriorating working relationships with employees.

Despite this, it is still recommended to sign such contracts, as the advantages are much more important than possible disadvantages. In addition, everyone can use the free nda template available on the website of Pandadoc. This site is considered №1 in the field of creating various contracts. With it, you will be able to automate the document flow, as well as easily track and manage all available agreements.