A non-disclosure agreement is a contract whereby two parties signing it agree not to disclose any confidential information outside of work. Non-disclosure agreements are generally made to protect business confidential.
For instance, you are doing some business and you have hired a few employees or contractors to do some work that requires sharing of some sensitive information with them. Now obviously, you don’t want that the employees/contractors to share the information with anybody. What you should do is enter into a non-disclosure agreement with them and prevent them from sharing it outside of work.
The main purpose of the non-disclosure agreement is to protect sensitive information. It is a legally binding contract between the two parties.
A non-disclosure agreement usually has the following clauses:
- Parties to the contract: There are two types of non-disclosure agreements, namely-
(a) Unilateral or one-way agreement- Under this agreement, only one party has the information that has to be shared with the other party before the contract is signed.The party having the information is called disclosing party and the other party is called the receiving party.
(b) Mutual or two-way agreement- Under this agreement, both the parties have the information which they share with each other.
- Confidential Information: The agreement must state what information needs to be protected or kept confidential.
- Disclosure of Confidentiality: This clause specifies the purpose for which such information can be used. Also, it may specify the name of such persons with whom confidential information can be shared.
- Term of the contract: The agreement should specify the date of the agreement and the duration for which the contract exists. It may provide clauses for whether disclosure rules and obligation will apply after the expiry of the contract or not.
- Remedies: The agreement must provide for remedies to be adopted in case either of the party breaches the contract.