A non-disclosure agreement (NDA), otherwise known as a confidentiality agreement, is a standard document you can use to protect your business’s confidential information. Confidential information can vary depending on the nature of the business. However, it usually includes information that has significant value to the company. Your NDA can be valid for a specific timeframe (typically around 2 to 3 years) or indefinite period, depending on what the parties agree. This article explains what an NDA is and how long your NDA will be valid.
What is a Non-Disclosure Agreement?
An NDA is one of the most common documents businesses use when they are seeking to protect their confidential information. If you want to protect your business’s confidential information, an NDA can be a good starting point.
You may use NDAs in a range of situations. For example, suppose you want to appoint a distributor to distribute your goods. In that case, you will probably need to share some confidential information with them to decide if they are suitable and to negotiate the terms of the arrangement before you enter a formal distribution agreement. In these cases, you can protect your confidential information through an NDA.
What Does a Non-Disclosure Agreement Include?
NDAs can vary depending on the nature of the transaction and each party’s bargaining power.
Generally speaking, an NDA should include the following:
1. Details of the Arrangement
Your NDA should clearly set out:
- who is disclosing information; and
- who is receiving confidential information.
An NDA might be mutual, or one-way. A mutual NDA is appropriate if both parties disclose and receive confidential information. On the other hand, a one-way NDA is appropriate if only one party in the arrangement is disclosing confidential information. You should be aware of this when entering an NDA.
2. Definition of Confidential Information
Confidential information can be anything you want to protect. Whatever you choose, you must clearly define this in your NDA. The chosen information can be as broad as ‘all oral and written information’ and ‘commercially sensitive documentation’ or as specific as named documents and databases.
As a business owner, it is in your interest to keep the definition of confidential information as detailed and wide as possible as this will provide you with more protection.
3. Exclusions
Confidentiality obligations will not apply to certain information a recipient receives if it is excluded in the NDA. Examples of common exclusions include information that is:
- already in the public domain;
- in the recipient’s knowledge prior to the execution of the NDA; and
- required to be disclosed by law.
As a business owner, you would also want the right to share the confidential information you receive with your employees and other third parties, including legal representatives. Accordingly, you should include this in your NDA.
Continue reading this article below the formHow Long is My Non-Disclosure Agreement Valid?
Your NDA will usually be valid for the term agreed to in the executed NDA. The ‘term’ refers to the period that the NDA obligations will bind the parties. A standard term for an NDA is typically 2 to 3 years. However, you may vary this depending on the nature of the transaction and the information you are sharing. In some cases, the parties will have ongoing obligations for a further term upon the termination of the NDA.
As a business owner, you may want to push for the longest possible term for your NDA. However, be mindful that it may be challenging to persuade the other party to sign an agreement with a long or indefinite term. For this reason, it is essential to negotiate a reasonable and practical NDA term.
For example, suppose you enter an NDA to decide if the counterparty will be a suitable distributor for your goods. The term of your NDA will end before the 2 year term if you enter a formal distribution agreement with the counterparty. In such a case, your confidential information can still be protected if you include further confidentiality clauses in your distribution agreement.
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Key Takeaways
A non-disclosure agreement will usually be valid for the term agreed to by the parties and specified in the NDA. From a legal perspective, your NDA will be valid for the term in the contract, with some ongoing obligations upon termination. However, from a commercial perspective, it is essential to negotiate a reasonable and practical term for your NDA. Otherwise, other parties may be hesitant to enter into an agreement with you.
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Frequently Asked Questions
An NDA is a document businesses use when they are seeking to protect their confidential information. It is an agreement between the parties not to disclose the information specified in the agreement.
The NDA term refers to the time period the NDA is in effect and binding on the parties.
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