Non-Disclosure Agreements
A non-disclosure agreement (NDA) is a contract between parties that protects the use and disclosure of sensitive information (also known as confidential information).
The NDA sets forth the terms and conditions pursuant to which the confidential information will be provided by one party (the disclosing party) to the other party (the receiving party), and it outlines each party’s rights and responsibilities.
All companies, regardless of industry, enter NDAs in the ordinary course of business, but they often arise when disclosing sensitive information to potential investors, employees, business partners, or vendors. Unfortunately, many companies, to their detriment, spend inadequate time reviewing the substantive terms of NDAs, not recognizing how those terms might adversely impact their business. Having experienced counsel carefully review and negotiate the terms of an NDA helps:
1
Comprehensive Contract Review
Ensure alignment regarding what information is confidential and how it can be used and disclosed, thereby preventing costly misunderstandings and disputes. It is important that each party clearly understands what information is considered “confidential information,” what that information can be used for (it is usually for a limited purpose, such as to evaluate and negotiate a specific transaction), and who the receiving party can share that information with (ex. third parties like their lawyer or accountant).
2
Cost-Effective Solutions
Identify ancillary restrictions that can have a significant impact on the operation of your business. Some NDAs include restrictions that go beyond use and disclosure of confidential information, such as restrictions on (a) soliciting/hiring the disclosing party’s employees and contractors, (b) contacting the disclosing party’s customers, suppliers, competitors, lenders, etc., or (c) investing in certain companies, securities, or properties.
Often, non-lawyers don’t expect those types of restrictions in an NDA and unknowingly agree to them because they are more focused on the business opportunity at hand and discount the review of an NDA.
3
Risk Mitigation and Legal Protection
Protect your business and reduce potential future liability. While we all hope an agreement is never litigated, it is prudent to protect yourself in case a dispute ever arises. Courts often defer to the terms of a contract when there is a contract dispute, so it is important to make sure the contract terms reflect your understanding of the arrangement.
Unfortunately, the initial draft of any contract is often written in one-party’s favor, so the other party must negotiate the terms if it wants a more balanced, fair approach to sharing risk. Moreover, a well written contract that clearly lays out the business understanding between the parties will keep the costs of dispute resolution lower.
Customized Solutions for Every Business Agreement
At GTX Legal, we understand that not every NDA or business arrangement is the same. Some NDAs may be very important to your business, justifying a thorough review and negotiation, while others are less significant. We get that, which is why we offer two service offerings for NDAs, allowing you to tailor the amount of support needed (and costs incurred) based on the needs of your business.
See the “pricing” page for further details on those two service offerings.