A well-drafted non-disclosure agreement (NDA) is a crucial tool for businesses to protect their confidential information and trade secrets, which often have substantial commercial value.

NDAs can either be mutual, when both parties are disclosing confidential information to each other, or one-way –  when only one party is disclosing confidential information. There are different considerations depending on the type of NDA. In general, when drafting an NDA it is essential to include key provisions that offer comprehensive protection and ensure enforceability.

Here are a few key terms to include in an NDA:

Definition of Confidential Information – Parties should clearly define what constitutes confidential information within the agreement to avoid ambiguity and ensure all parties understand what information is protected. It is common to include exclusions to the definition of confidential information, which typically include information already in the public domain or information independently developed by the receiving party.

Purpose and Scope – The NDA should include the purpose for which the confidential information will be shared and outline the scope of permissible disclosure. This helps establish the boundaries of confidentiality and prevents unintended or excessive disclosure. Clearly defining a purpose (i.e. “to allow the parties to negotiate with respect to a particular transaction”) is very important, as it can be used as a reference point for the scope of the NDA, and the permitted use of confidential information.

Obligations of the Receiving Party – The obligations of the party receiving confidential information should be clearly defined, including restrictions on disclosure, use, reproduction, and safeguarding measures to be taken.

Permitted Disclosures – Certain disclosures of confidential information are typically allowed, but the specific circumstances under which the receiving party may disclose the confidential information must be documented in the agreement. These typically include mandatory disclosures pursuant to court orders or other judicial or legal process.

Term and Termination – The term of the agreement should be defined, as well as the conditions under which it can be terminated, ensuring that confidentiality obligations survive beyond the agreement’s expiration or termination, for a specified time period. It is advisable to prescribe a longer protection term for sensitive information or information qualifying for protection under the law (i.e. trade secrets). Common timeframes range between one year to 10 years, however, depending on the information that is to be kept private, and the jurisdiction, the term might differ.

Remedies for Breach – Because an NDA breach may result in such damage that cannot be adequately remedied by monetary compensation, it is common to include a list of remedies available in the event of a breach, including equitable remedies, injunctive relief, and attorney’s fees. This provision helps deter potential breaches and provides a means of effective recourse if confidentiality is compromised.

Governing Law and Jurisdiction – It is important for the parties to agree on, and include, the governing law and jurisdiction in the agreement, as this will affect the agreement’s interpretation, and the parties’ rights and obligations in the event of a dispute.

No further agreement – It is common for parties to include a clause confirming that by entering into an NDA, they are not committing to enter into any further agreement or continue any negotiations or discussions to that effect. This helps clarify that the NDA is not meant to serve as a pre-agreement or an ‘agreement to agree’.

Other clauses – Depending on the parties’ relationship and the jurisdiction, parties often choose to include non-solicitation obligations, personal data protection obligations, and other clauses tailored to the specific purposes for which the NDA was put in place.

By including these key legal provisions in an NDA, adjusted appropriately for each specific case, parties can exchange information having established a solid foundation for protecting their confidential information, and thus mitigating the risks of unauthorized disclosure or misuse.

Lydia Vradi is an attorney with Pardalis & Nohavicka licensed to practice in New York, California, and Greece. She has over 9 years of experience and focuses her practice on corporate law, intellectual property, and investment transactions.