A mutual non-disclosure agreement (NDA) helps prevent unauthorized disclosures of confidential information between two parties. Review the following guide to learn about the key terms and things to consider when creating this agreement.
Note that the agreement often references a "Recipient" and a "Discloser" of confidential information or trade secrets. As this is a mutual NDA —also called a bilateral NDA—either party may be a recipient or a discloser depending upon the situation. Whenever a party receives such information they are the recipient, and whenever a party discloses such information they are the discloser.
Each party is required to maintain strict confidentiality of the other party’s confidential information and trade secrets. If a party learns that an unauthorized disclosure has occurred, that party must inform the other party.
The duration of the parties’ duty of confidentiality can continue for as long or as short as is necessary to protect the parties’ interests. For instance, if a party is receiving valuable trade secrets that can never be disclosed without damaging the discloser’s business, you can require confidentiality indefinitely. However, you should always limit the duration to as little as is necessary to protect the parties’ legitimate business interests.
The terms of the agreement state that neither party is making any guarantees as to the accuracy of the confidential information disclosed or as to how such information will be used. It is usually recommended that the parties disclaim all warranties as to the accuracy and potential uses of the confidential information. The main reason you would not do this is if a party has made promises that the confidential information being disclosed is true and accurate or that it can be used for a particular purpose. If you do not want to disclaim all warranties, then you should remove this clause from the agreement.
Under the terms of the agreement, each party will retain all work produced by the recipient as a result of the disclosure of confidential information.
It is usually recommended that you include an arbitration provision. This requires that disputes between the parties are to be settled through binding arbitration, thereby avoiding the time and expense of going through the formal court system.
Next, select the state law that will govern the agreement in the event of a dispute. Usually, the governing state is the state where the parties transact business.
After reading the document, enter any final additional promises made by the parties or required terms. This is your opportunity to put the finishing touches on customizing your document to your needs.
As mentioned above, LegalNature's agreement uses a definition of "confidential information" and "trade secrets" designed to ensure maximum protection of the parties' information. Therefore, you are not required to specify the specific information that is to be kept confidential. However, including this information with your additional terms may help clarify the expectations of the parties.
Each party must sign and date the document in order to make it legally enforceable. You may use electronic signatures and email if you wish to avoid needing to print. Save your copy for your records.