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Non words is a word that has no meaning. It’s the opposite of “words.”

A non-disclosure agreement (NDA), often known as a confidentiality agreement, is a legal instrument that protects your company’s sensitive data and information. When disclosing this sort of information with at least one other person or entity, firms utilize an NDA. The paper specifies that neither one nor both of the parties to the agreement may divulge the information. Below is a free NDA template that you may use or modify for your company. Consider using a professional firm like Rocket Lawyer to ask legal issues when drafting your NDA.

Go to Rocket Lawyer for more information.

Non-Disclosure Agreement Template for Free

Download our free NDA template, which you can alter to protect your company’s trade secrets or customer information.

NDA Template (PDF)

Non-Disclosure Agreement vs. Confidentiality Agreement

The phrases “confidentiality agreement” and “non-disclosure agreement” are often used in business and law, and it’s easy to get them mixed up.

Confidentiality and non-disclosure agreements cover the same ground, which is basically information protection. Any small discrepancies in how each phrase is used have more to do with the parties to the agreement or the industry in which it is used than with anything prescribed by law.

It’s OK to consider these references to these papers as referring to the same resource, as well as associated safeguards and requirements.

What Should a Non-Disclosure Agreement Contain?

A non-disclosure agreement (NDA) assures that anybody with access to your company’s operations does not reveal sensitive information to anyone without your permission. Non-disclosure agreements may spell out the conditions under which a company’s information is shared. An NDA spells out what will happen if the agreement is breached, who will cover all costs, and what the consequences would be if the agreement is broken. NDA agreements should be ready in advance of the employee’s new hire or onboarding documentation so that they may be signed.

The four sorts of information that should be included in an NDA, regardless of the length or type of agreement, are mentioned below, along with the order in which they should appear in your NDA.

1. The Start Date

The date on which an NDA takes effect must be specified. This is usually the day on which the agreement is signed, such as an employee’s or contractor’s first day on the job, although it may be any date. Let’s imagine you’re employing a vendor to assist you in developing your marketing strategy, and they’ll start working in two weeks. You may wish to set your NDA’s effective date for two weeks from now.

2. Time Limits

The NDA must also state the length of time the agreement will be in force. This might last anywhere from a day to an indeterminate amount of time after your employee’s job has ended (including years). The length of the NDA will depend on what you’re seeking to protect. In the time period section, consulting with an attorney may be the best option. They can help you weigh the benefits and drawbacks.

3. Confidential Information

The information sought to be safeguarded, as well as the owner of the information, must be specified in the agreement. In the agreement, this information is referred to as “confidential information.” The secret information must be described in explicit and comprehensive terms. General terms should be avoided since they are difficult to define and much more difficult to establish in court.

4. Consequences of Breach of Contract

If the company believes the receiving party is likely to divulge the information, the agreement must include a condition that allows it to seek an injunction from a court of law. If the party receiving the information breaks the agreement after it has been signed, the party might be sued for damages.

Sections of Non-Disclosure Agreements

As shown in our free NDA template, your NDA should include some or all of these components. You and your business attorney may wish to alter each component to match your company’s needs, and you and your lawyer may want to add or remove portions depending on local case law.

Introduction

Describe your firm and the entity (individual or business) with whom you are entering into an agreement in the introductory portion of your NDA. Include the date as well, so that the contract is legally binding as of a certain time range or start date.

Example of an introduction:

This Agreement [“Agreement”] is formed between [“Company”] and [“Employee / Vendor”], generally referred to as the “Parties,” as of Date [“Effective Date”].

Purpose

Declare the agreement’s purpose. If you’re working with a supplier, for example, you’ll specify what information the supplier will have access to, such as client purchase information. This portion of the NDA template will be customized to suit your needs. This is also where you may set the duration of the NDA’s validity.

Consider the following scenario if you’re working with an employee:

[Company] owns, possesses, or controls certain proprietary and private information of a technical, commercial, or research nature, and is prepared to provide this information to [Employee Name] on the terms and circumstances set out in this Agreement.

Disclosure

This section explains who (for example, the firm or organization) is delivering information to whom (for example, an employee or vendor). It outlines the rights of a person or company that discloses sensitive information.

Care Requirements

This section indicates that confidential information should be protected with all reasonable means.

Restrictions on Disclosure

This section explains when and how information should be shared with third-party outsiders. Your website developer, for example, may need authorization to exchange passwords with a web hosting firm.

Those who have been given explicit permission to access

This section contains a list of anybody else who may be allowed access to confidential information. Your accountant’s assistant, for example, may need access to your company’s financial data and vendor contracts in order to create reports.

Storage Constraints

This section usually states that no copies are permitted, and that electronic materials must be kept safe, not shared with others, and destroyed after usage.

Reduced Obligation Situations

This optional clause states that material in the public domain or publicly known information does not have to be kept hidden.

There is no representation.

This section affirms that the agreement solely protects the information of the parties named in the agreement, and that it does not cover information from other parties.

Damages Recognized

Damages will be levied if the agreement is breached, according to this provision.

Upon request, information is returned and deleted.

Information and data must be returned to the company upon request under this area.

Severability

This section contains legal language that states that even if one element of the contract is invalid, the remainder of the contract remains lawful.

Indemnification

This part largely aims to safeguard the company by declaring that it is not the responsibility of the business if the agreement is breached by an employee or contractor, for example.

Entire Agreement / Merger Clause

This phrase informs both parties that, regardless of previous agreements, emails, or discussions, this agreement is the most important document.

Modification

This clause gives both parties the option of changing the terms at any time.

Delegation / Assignment

This clause safeguards the company by stating that the opposite party cannot transfer the agreement to another party. This is useful if, for example, a contractor sells their firm and wishes to tell the new buyer your conditions. A new NDA would be required if the company was sold.

Enforcement

The laws of which states apply are specified in this section. It explains where an injunction or court case may be filed in the event of a legal action.

Sincerity

This section presupposes that everyone participating in the agreement is operating honestly and isn’t attempting to take advantage of one another.

Interest Successors

This explains that the agreement may be enforceable by others. In the case of an employee, this would not be the case. However, if you had a contract with a vendor and the seller passed their company on to their children, the contract would still be valid.

Multiple Parts of Execution

This section is optional and is used if the agreement is made up of many portions or if there are copies of the agreement that should be treated equally to the original.

Contracting Capacity

This part verifies that the communication is being made by persons who are legally competent of entering into a contract, such as adults who are not minors or who are mentally incapable of signing a contract.

Terms and Conditions

This section verifies that both parties have read and agreed to the document’s terms.

Construction

In the event of a dispute, the section considers that all parties contributed equally to the document’s creation.

Signatures

The paper should be signed and dated by both parties. The business/employer should keep the original NDA on file. Make a duplicate and provide it to the employee, contractor, vendor, or other person.

What Can’t a Non-Disclosure Agreement Protect?

An NDA cannot include all types of information. These agreements exclude, but are not limited to, the following items:

• Anything that is public record is not private information and cannot be protected by a non-disclosure agreement.
• An NDA cannot contain any information that the receiving party has previous knowledge of or has obtained from several sources.
• Even if covered by an NDA, information susceptible to a subpoena may not be shielded.
• Information that is common knowledge in a subject, such as the HVAC procedure in our example, is not protected information. For example, regardless of whose firm one works for, the procedure for lighting a pilot light is the same.

An NDA isn’t designed to keep a firm from breaking the law; if your company engages in unethical or unlawful business activities, your customers, workers, and suppliers have the right to report it to the appropriate authorities.

Reviewing a Non-Disclosure Agreement Cost

You may get a non-disclosure template online for free, or use the one we’ve supplied as a starting point. However, it’s essential to have an attorney check it for your state’s laws before utilizing it. This might cost somewhere between $100 and $200 per hour (or more if you’re looking for an expert or conducting business in a big city like New York). Your agreement’s text should be checked by a legal professional to ensure that it is legitimate.

There are a couple methods to have someone evaluate and finalize your NDA:

• Hire an attorney by the hour for $100-$200 to evaluate and complete your NDA.
• Use a service like Rocket Lawyer, which gives legal advice on its templated paperwork, for $39.95 – $49.95 each month.

Unless you’re an attorney, drafting your own NDA might be dangerous. You may start with a template and have it evaluated by an expert for anywhere between $0 and $59.95, improving the chances that your NDA will hold up in court.

What Should You Do With Your Non-Disclosure Agreement?

Consider include an employee confidentiality non-disclosure agreement in your employee handbook to clearly define your company’s stance on private information.

This is because the employee handbook defines what is intended to be covered by the agreement in plainer terms, functioning as agreement training. It’s also a lot simpler to update the manual as your company grows (whereas the contract should be written in a way that rarely should need editing).

The following components should be included in the portion of the employee handbook that discusses the significance of confidentiality:

• Labeling proprietary data as “secret and confidential,” similar to how hard drives or client files are labeled.
• Having passcode-required apps or files restricts employee access to secret information to those who “need to know.”
• Searching staff lockers, workstations, and computer files for unlawful information storage on a regular basis.
• Notices explaining the company’s policy should be posted near photocopiers, printers, and fax machines.
• Obtaining NDA signatures from outside consultants and temporary staff.

If the confidentiality agreement is to succeed, the company must clarify what constitutes a secret in the handbook.

Remember to add an acknowledgement in job termination notes that reminds workers that they are still responsible for not misusing firm trade secrets after they’ve been fired.

Consider employing an all-in-one HR, benefits, and payroll provider like Gusto if you need a location to keep your NDAs and employment documentation. In addition to electronic signatures and online document storage, Gusto offers HR, payroll processing, benefits, and health insurance administration. Furthermore, if you inquire about their Concierge service, you will have access to their legal specialists to guarantee that your NDA is sound.

Try Gusto

Who Should Use a Non-Disclosure Agreement?

We’ll presume an NDA is preferable for small firms with trade secrets or customer lists to protect for the sake of this essay. An NDA, on the other hand, might be utilized by a contractor who wants to preserve confidential information or proprietary tools offered to a client.

NDAs may be required by two types of small company users:

• A company owner may want to safeguard their proprietary business processes, master customer list, or product formulations.
• Independent Contractor: An independent contractor may wish to protect trade secrets they’ve supplied, such as selling abilities or how to cultivate award-winning orchids for sale, from being shared with a client.

You won’t want contingent employees and business partners stealing, utilizing, or selling your trade secrets and customer information, whether you offer private inputs to a corporation or engage gig workers to build your pricing sheets.

A Non-Disclosure Agreement (NDA) safeguards confidential information.

Proprietary information is a wide phrase that refers to a variety of sorts of data that are valuable to the owner. Information, data, software, and other work products generated on behalf of a corporation or utilizing the company’s facilities are examples of proprietary information.

It’s knowledge that took a long time or cost a lot of money to generate, or that has inherent worth. If the information is given to others or without suitable constraints, its value may be decreased or eliminated. The following are the essential characteristics for proprietary information:

• The knowledge isn’t well understood by the general population.
• The knowledge offers the company an edge over competitors.
• To safeguard its secret, reasonable attempts are done.

Consider the following reasons why a company could need an NDA:

1st example:

An accounting manager leaves your company to work for a rival as the finance director. In his previous position, he assisted in Board of Director meetings and participated in beta-testing of your company’s new goods. He may be able to inform the new company about two unreleased beta-testing goods. In this situation, an NDA would safeguard your company.

Explanation 2:

Your human resources manager has quit to establish her own business. She utilized Indeed to recruit for you and continues to use it in her own business. Because Indeed is a public product, she wouldn’t be able to use the same software at two separate companies if she signed an NDA.

Let’s have a look at some more frequent business scenarios where an NDA could be appropriate:

NDAs & Common Business Situations

3 Questions to Ask Yourself to Determine Whether or Not You Need a Non-Disclosure Agreement

Whether you’re not sure if your company need an NDA, consider the following yes or no questions:

• Would an employee informing a rival about our internal business operations do irreparable damage to our company?
• Would our vendor or business partner informing another firm in our industry about our relationship with them cause irreparable harm to our business?
• Would I want the grounds to terminate an employee if I discovered they were disclosing our sales secrets or putting our restaurant recipes on the internet?

If you responded “yes” to any of these questions, you’ll need a non-disclosure agreement (NDA) to safeguard your company.

Unilateral vs. Mutual NDAs are two different types of confidentiality agreements.

Unilateral and mutual NDAs are the two kinds of NDAs. A unilateral NDA is a one-way contract in which a company protects its trade secrets or information. When a company needs sensitive information from an employee or contractor, this is the most usual method. When two firms need to safeguard one other’s secrets, they employ a mutual NDA.

Vendors and partners, for example, often form bilateral NDAs. Mutual NDAs protect both parties equally when they collaborate on a joint project, such as a merger, or when they have a supplier/manufacturer relationship.

The Agreement on Non-Disclosure (Unilateral Non-Disclosure)

The use of unilateral NDAs is becoming widespread. In a unilateral NDA, the firm reveals information to a third party, and the recipient undertakes not to divulge it. This is typically utilized with a company’s workers or investors.

An example of a unilateral NDA is as follows:

Bill has a firm that sells healthy frozen foods. He requires all of his workers to sign a non-disclosure agreement (NDA) promising not to divulge or sell the taste formula or production technique to rivals.

The Non-Disclosure Agreement (NDA)

The parties to a mutual NDA agree not to divulge one other’s information. This sort of non-disclosure agreement is most often used when two firms exchange confidential information, such as when launching a product jointly. This is more valuable for a company’s suppliers, customers, and other key business partners.

A Mutual NDA is an example of a non-disclosure agreement.

Because they both offer services for individuals moving in and out of their homes, a cleaning business and a moving company have chosen to cross-market to each other’s customer base. While conducting business together, they would most certainly discover trade secrets from one other. A Mutual NDA would be signed and dated by both parties.

Non-Disclosure Agreement Benefits

In general, an NDA gives you the right to sue for damages if an employee, contractor, vendor, or other third party discloses or discusses your company’s trade secrets.

• It’s time-sensitive: A court would be aware of the precise dates when an NDA is in force.
• It’s unique to each organization and individual: a court would determine who is shielded from whom.
• There’s no he said/she said in print. What has been agreed upon is clear.
• It’s signed: It’s evidence that both parties read and comprehended it.

The Negative Effects of a Non-Disclosure Agreement

A small company owner, on the other hand, may believe that an NDA is excessive, or may be hesitant to use one for fear of offending a business partner. And, like any other legal instrument, an NDA must be maintained up to date.

• Maintaining it: An NDA is similar to your yearly taxes in that you must keep track of it and examine it at least once a year to make modifications or update dates.
• Keeping it safe: You’ll need a strong file system to be able to find the NDA when you need it, such when you need to update your contractor’s project deliverables and timetables.
• Enforcing it: An NDA is only useful if it is followed through on. To pursue damages from someone who breaks your NDA, you’d need to employ a lawyer.
• Obtaining signatures: In order to be upheld in court, an NDA needs signatures.

Using a Non-Disclosure Agreement as an Alternative

To safeguard the secrecy of your company’s sensitive information, NDA wording may be incorporated to your employee handbook rather than establishing a separate document. The following are some instances of when utilizing a shorter or alternative form makes sense.

Instead of utilizing an NDA, comparable wording might be included to these documents:

Non-Competition Agreement (Non-Competition Agreement)

You may use a non-compete agreement instead of or in addition to an NDA to ensure that your workers don’t go to work for a rival or start their own firm utilizing your ideas after they leave your company. Non-compete agreements aren’t legal in several jurisdictions, including California.

Handbook for Employees

Rather to utilizing a full-fledged NDA, many firms decide to include a few phrases in their employee handbook, such as prohibiting workers from sharing corporate information outside of the organization. You may use the text from our NDA form above to supplement your current employee handbook, or you can construct your own using our free employee handbook template.

Contract of Employment

When recruiting W-2 or 1099 employees, some company owners choose to draft an employment contract to safeguard their interests. They could want to include a non-disclosure clause to the job contract.

Working Arrangements

If you have business partners, you may wish to incorporate NDA wording in your operating agreement. That way, everyone in your firm LLC knows who has what rights.

Final Thoughts

Consult with your attorney if you believe a non-disclosure (or confidentiality) agreement is necessary for your company. You may start with our free template, but make sure the design you choose is appropriate for you. It’s preferable to be too thorough than to leave out important elements that your company need.

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