How to Create a Mutual Non-Disclosure Agreement

A mutual non-disclosure agreement is the most effective way for two parties to share proprietary information. It will prevent each party from disclosing each other’s confidential information or trade secrets to third parties or using it for their own benefit.

This agreement uses a broad definition of "Confidential Information" and "Trade Secrets" to make sure each party’s proprietary information remains well protected.

The mutual non-disclosure agreement will accomplish the following for you:

  • Protect against the unauthorized disclosure and theft of confidential information or trade secrets by third parties
  • Require each party to disclose any and all conflicts of interest
  • Allow the parties to include an arbitration provision and add fully customizable clauses that illustrate the full intentions of the parties

Party Information

Begin this document by first identifying the parties involved. The party disclosing confidential information is the “Discloser” and the party receiving it is the “Recipient.” It is important to note that the parties are interchangeable in this document, meaning that either party may be the Discloser or Recipient at any one time depending on who is disclosing and who is receiving the information. A party can be an individual or business entity, but be sure to specify each party’s full legal name.

Agreement Time Period

You will then specify when you want the agreement to go into effect and for how long you want the parties’ duties of confidentiality to last. Often the parties will want each other’s duty to last indefinitely. This means that each party will be required to maintain confidentiality even after the termination of the parties’ business relationship. If this seems unreasonable under the circumstances, the parties can always opt for a shorter time period.

Warranty Disclaimer and Arbitration

After that, you will need to specify whether or not the parties want to disclaim all warranties as to the confidential information. This means that a party that discloses confidential information cannot be held liable should some of the information or trade secrets communicated to the other party turn out to be erroneous or should the Discloser end up not using the information as planned. Typically parties will choose to disclaim all warranties unless express promises were made as to the accuracy or future use of the information.

Binding Arbitration

If the parties have a dispute, they will also have the option of requiring disputes to go to binding arbitration instead of through the formal court system. This allows the parties to resolve disputes much faster and for only a fraction of the cost of going through court.

If a dispute does occur, it will be submitted to either a single arbitrator or an arbitration panel in the city chosen in the mutual non-disclosure agreement. For these reasons, it’s usually a good idea to include an arbitration provision unless you have a good reason not to do so.

Final Matters

Lastly, you will indicate which state’s laws you want to govern the agreement as well as any additional terms you want included. If the parties’ principal places of business are in the same state, then you could use that state’s laws to govern the agreement. Another option would be to use the state where the parties are conducting business together. After that, you can then add any other terms and conditions desired.

This allows you complete flexibility to tailor the document to reflect the specific situation and true intent of the parties. Be sure to preview the agreement first so that you know what’s already been included. After that, just follow the instructions at the end of the document to formally execute it. Also, make sure all parties get a copy of the final version.

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