What Is a Non-Disclosure Agreement (NDA)?

A non-disclosure agreement is a legally binding contract that establishes a confidential relationship. The party or parties signing the agreement agree that sensitive information they may obtain will not be made available to any others.

Non-disclosure agreements are common for businesses entering into negotiations with other businesses. They allow the parties to share sensitive information without fear that it will end up in the hands of competitors. In this case, it may be called a mutual non-disclosure agreement.

What to Include in an NDA

NDAs may be customized to any degree but there are six major elements that are considered essential:
• The names of the parties to the agreement
• A definition of what constitutes confidential information in this case
• Any exclusions from confidentiality
• A statement of the appropriate uses of the information to be revealed
• The time periods involved
• Miscellaneous provisions.

Understanding the NDA

• The NDA serves a purpose in a variety of situations.
• NDAs are generally required when two companies enter into discussions about doing business together but want to protect their own interests and the details of any potential deal. In this case, the language of the NDA forbids all involved from releasing information regarding any business processes or plans of the other party or parties.
• Some companies also require that new employees sign an NDA If the employee has access to sensitive information about the company.
• NDAs are also commonly used before discussions between a company seeking funding and potential investors. In such cases, the NDA is meant to prevent competitors from obtaining its trade secrets or business plans.
• Keeping Plans Secret.
• In all of the above, the information that is being protected may include a marketing strategy and sales plan, potential customers, a manufacturing process, or proprietary software.

Benefits of Non-Disclosure Agreement

At first, the non-disclosure agreement helps the Company in protecting its sensitive information from the competitors to maintain its competitive advantage. It also has marketing advantages for the Company as it does not disclose all the information regarding its products and technical know-how.