Legal Article | Non Disclosure Agreements: Provisions to Include and Pitfalls to AvoidMore Than Articles

Non Disclosure Agreements: Provisions to Include and Pitfalls to Avoid

Non-Disclosure Agreements (NDAs) are agreements between two or more parties that operate to enforce secrecy and confidentiality by at least one party to the agreement. It is very important to clearly draft an NDA to define what the confidential information is, what the obligations of the receiving party are, when the agreement is in effect, and what the remedies are for the injured party in the event of a breach.

After listing the parties to the agreement, the date of the agreement, and the overall purpose of the agreement to prevent the unauthorized disclosure of confidential information (as defined in the agreement), the first provision of the NDA should define "confidential information." For instance, confidential information could be all information or material that has or could have commercial value, or other utility in the business in which the disclosing party is engaged. This paragraph may also define how confidential information is to be labeled (such as by marking such information with a "confidential" stamp.)

Next the agreement should list all exclusions from the term "confidential information"; in other words, the agreement should define information or materials that are not confidential, even though they could be though of otherwise. Usually this limitation will extend to information that is either (a) publicly known, (b) discovered or created by receiving party before disclosure by disclosing party, i.e. things the receiving party discovered on his or her own, (c) information the receiving party learned through other legitimate means, or (d) information disclosed with disclosing party's prior written approval.

The agreement should then address the obligations of the party who is receiving the confidential information. Broadly speaking, the receiving party must agree to hold and maintain the confidential information in the strictest confidence for the sole and exclusive benefit of the disclosing party. She must also agree that without prior written approval, she will not use the disclosing party's confidential information for her own benefit, nor shall she publish, copy or otherwise disclose to others, or permit the use by others for their benefit, any confidential information. Notice the clause "or permit the use by others." This is a key clause that any disclosing party will want to make sure to include. Otherwise, the disclosing party could have a tough time proving a breach if a third party discloses the confidential information with the help of the receiving party. The disclosing party may also want to include in the agreement a provision that the receiving party shall return any and all records, notes, and other written, printed, or tangible materials in its possession pertaining to confidential information immediately if requested in writing by disclosing party.

Next the agreement should define the time periods of the relationship. This provision, however, could make the agreement not to disclose confidential information indefinite. The agreement can be written to say that the non-disclosure provisions of the Agreement shall survive the termination of this Agreement and the receiving party must hold the confidential information in strict confidence until the information no longer qualifies as a trade secret or until disclosing party sends receiving part written notice releasing receiving party from the Agreement.

Finally, it is important for the disclosing party to carefully define the term "confidential information", list any exclusions to when the promise does not apply, describe in detail the obligations of the parties, and include a provision addressing the time period that the non-disclosure agreement remains in effect. Finally, the drafter of the non-disclosure agreement may also want to include boilerplate contractual language regarding severability, integration, assignment, and choice of law.

About the Author

Mark Warner is a Legal Research Analyst for RealDealDocs.com. RealDealDocs gives you insider access to millions of legal documents drafted by the top law firms in the US. Search over 10 million Documents, Clauses, and Legal Agreements for Free at http://www.RealDealDocs.com

Author Profile: ptiarticle

Other Legal Articles