Free Non-Disclosure Agreement Template (Word)

Protecting sensitive information is crucial in today’s competitive business world. Companies often need to share confidential information with employees, partners, or potential investors, but they must ensure that this information remains private and is not disclosed to unauthorized parties. A non-disclosure agreement (NDA) is a legal contract that defines the information that the parties wish to protect from dissemination and outlines restrictions on its use.

Table of Contents

NDAs are valuable tools for protecting trade secrets, sensitive business information, and even the ability to patent an invention.

This article will explore the purpose and types of NDAs when they are necessary, how to write one, what happens if you break an NDA, and how long an NDA lasts.

What Is a Non-Disclosure Agreement (NDA)?

A non-disclosure agreement, also known as a confidentiality agreement, is a legally binding contract between two or more parties that establishes a confidential relationship. It defines the information that will be shared between the parties and sets out the terms and conditions under which the information can be used or disclosed.

NDAs are commonly used in business transactions, employment relationships, and partnerships to protect sensitive information from being shared with unauthorized individuals or entities.

Sample non-disclosure agreement template with sections for confidentiality terms. — Sample Non-Disclosure Agreement Template

The Purpose of a Non-Disclosure Agreement

The primary purpose of a non-disclosure agreement is to protect confidential information from being disclosed to unauthorized parties. By signing an NDA, the parties agree to keep the information confidential and to use it only for the specified purpose. NDAs are essential for safeguarding trade secrets, proprietary information, customer lists, financial data, and other sensitive business information. They also play a crucial role in protecting the ability to patent an invention, as public disclosure of the invention can compromise its patentability.

Types of NDAs

There are two main types of non-disclosure agreements: unilateral and mutual.

Unilateral NDAs are agreements in which only one party discloses confidential information to the other party. This is commonly used in employer-employee relationships or when a company shares confidential information with a potential investor or business partner.
Mutual NDAs, also known as bilateral NDAs, are agreements in which both parties share confidential information. This type of NDA is often used in joint ventures, partnerships, or when two companies are considering a merger or acquisition.

When Do You Need an NDA?

Non-disclosure agreements are necessary in various situations where sensitive information needs to be shared. Some common scenarios include:

Employment relationships: When hiring employees who will have access to confidential information, such as trade secrets, customer data, or proprietary technology.
Business partnerships: When entering into a partnership or collaboration with another company and sharing confidential information.
Investor relations: When presenting a business plan or financial information to potential investors.
Vendor relationships: When working with vendors or suppliers who will have access to sensitive business information.
Product development: When collaborating with external parties, such as contractors or consultants, on the development of a new product or technology.

It is always advisable to consult with a legal professional to determine if an NDA is necessary in a particular situation.

How to Write a Non-Disclosure Agreement

Writing a non-disclosure agreement requires careful consideration of the specific terms and conditions that need to be included. Here are some key elements to include in an NDA:

Introduction: Clearly state the names of the parties involved and the date of the agreement.
Definition of confidential information: Clearly define what constitutes confidential information and provide examples.
Obligations of the receiving party: Specify how the receiving party should handle the confidential information, including restrictions on use, disclosure, and protection measures.
Exclusions: Identify any information that is not considered confidential and therefore not subject to the NDA.
Term and termination: Specify the duration of the agreement and the conditions under which it can be terminated.
Remedies: Outline the remedies available in case of a breach of the NDA, such as injunctive relief or monetary damages.
Confidentiality after termination: Specify the obligations of the parties regarding confidential information even after the termination of the agreement.

What Happens If You Break a Non-Disclosure Agreement?

If a party breaches a non-disclosure agreement by disclosing or improperly using confidential information, the consequences can be severe. The injured party can seek legal remedies, such as injunctions to stop further disclosure or use, and monetary damages to compensate for any harm caused by the breach.

It is important to carefully review and understand the terms of an NDA before signing it to avoid any unintended breaches.

How Long Does an NDA Last?

The duration of an NDA depends on the specific terms outlined in the agreement. Typically, NDAs have a defined term, which can range from a few months to several years. The duration of the NDA should be reasonable and necessary to protect confidential information. In some cases, NDAs may also include provisions for the perpetual confidentiality of certain information, even after the termination of the agreement.