Nondisclosure Agreement

Business, Legal & Accounting Glossary

Definition: Nondisclosure Agreement


Nondisclosure Agreement


What is the dictionary definition of Nondisclosure Agreement?

Dictionary Definition


A legally binding contract in which a person or business promises to treat specific information as a trade secret and not disclose it to others without proper authorization. Nondisclosure agreements are often used when a business discloses a trade secret to another person or business for such purposes as development, marketing, evaluation or securing financial backing. Although nondisclosure agreements are usually in the form of written contracts, they may also be implied if the context of a business relationship suggests that the parties intended to make an agreement. For example, a business that conducts patent searches for inventors is expected to keep information about the invention secret, even if no written agreement is signed, because the nature of the business is to deal in confidential information.


Full Definition of Nondisclosure Agreement


A non-disclosure agreement (NDA), also called a confidential disclosure agreement (CDA), confidentiality agreement or secrecy agreement, is a legal contract between at least two parties that outlines confidential materials or knowledge the parties wish to share with one another for certain purposes, but wish to restrict from generalized use. In other words, it is a contract through which the parties agree not to disclose information covered by the agreement. In rare cases, the contract may state that the existence of the NDA itself cannot be disclosed. An NDA creates a confidential relationship between the parties to protect any type of trade secret. As such, an NDA can protect non-public business information.

NDAs are commonly signed when two companies or individuals are considering doing business together and need to understand the processes used in one another’s businesses solely for the purpose of evaluating the potential business relationship. NDAs can be “mutual”, meaning both parties are restricted in their use of the materials provided, or they can only restrict a single party.

It is also possible for an employee to sign an NDA or NDA-like agreement with a company at the time of hiring, in fact, some employment agreements will include a clause restricting “confidential information” in general. Likewise, NDAs are used in the IT field and given directly prior to taking a certification exam.

Content

Some common issues handled within an NDA include:

  • outlining the parties to the agreement;
  • the definition of what is confidential, i.e. the information to be held confidential. Modern NDAs will typically include a laundry list of types of items which are covered, including unpublished patent applications, know-how, schema, financial information, verbal representations, business strategies, etc;
  • the exclusions from what must be kept confidential. Typically, the restrictions on the use of the confidential data will be invalid if
    • the recipient had prior knowledge of the materials;
    • the recipient gained subsequent knowledge of the materials from another source;
    • the materials are generally available to the public; or
    • the materials are subject to a subpoena. In any case, a subpoena would more likely than not override a contract of any sort;
  • provisions restricting the transfer of data in violation of national security;
  • the term (in years) of the confidentiality, i.e. the time period of confidentiality;
  • the term (in years) the agreement is binding;
  • permission to obtain ex-parte injunctive relief;
  • the obligations of the recipient regarding the confidential information, typically including some version of obligations:
    • to use the information only for enumerated purposes;
    • to disclose it only to persons with a need to know the information for those purposes;
    • to use all the efforts (but not less than reasonable efforts) to keep the information secure that the recipient uses to keep its own similar information secure; and
    • to ensure that anyone to whom the information is disclosed further abides by obligations restricting use, restricting disclosure, and ensuring security at least as protective as the agreement; and
  • types of permissible disclosure – such as those required by law or court order.

Cite Term


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Modern Language Association (MLA):
Nondisclosure Agreement. PayrollHeaven.com. Payroll & Accounting Heaven Ltd.
March 29, 2024 https://payrollheaven.com/define/nondisclosure-agreement/.
Chicago Manual of Style (CMS):
Nondisclosure Agreement. PayrollHeaven.com. Payroll & Accounting Heaven Ltd.
https://payrollheaven.com/define/nondisclosure-agreement/ (accessed: March 29, 2024).
American Psychological Association (APA):
Nondisclosure Agreement. PayrollHeaven.com. Retrieved March 29, 2024
, from PayrollHeaven.com website: https://payrollheaven.com/define/nondisclosure-agreement/

Definition Sources


Definitions for Nondisclosure Agreement are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 25th April, 2020 | 0 Views.