What is an NDA and is it really enforceable?
When entering a business negotiation, remember to discuss non-disclosure agreements (NDAs). An NDA, also known as a confidentiality agreement, is a legal obligation preventing parties from sharing information exchanged. A properly drafted NDA is a valuable tool to business owners because it protects sensitive information. If one party shares the information to the public, the other party can seek legal recourse.
Protect First, Negotiate Later
The NDA should be the first item discussed because it legally binds all subsequent conversations to confidentiality.
Imagine the following hypothetical: a business owner is trying to impress an investor. The business owner reveals his latest invention and provides a copy of the clientele list to gain the investor’s confidence. Without an NDA in place, the investor is free to share that information elsewhere. However, if the investor signs the NDA before negotiations, the investor cannot speak about any of discussions within the meeting. Alternatively, if the investor goes against a signed NDA and shares the information discussed, the business owner can take legal action.
Contents of the NDA
All NDAs should be specifically tailored to a business’ purpose. Some business will need less protection than others. Regardless, a well-drafted NDA should include terms addressing the following questions:
- Who will be bound by the agreement?
- What information will be confidential?
- What can be acceptably shared with others?
- What is the temporal duration of the NDA?
- What is the geographical scope of the NDA?
- What are the consequences of sharing information protected by the NDA?
Terms within the NDA should be reasonable. If the NDA terms are too broad, courts may refuse to enforce all of them. For example, say an employer in a very specialized field has a detailed NDA that prevents employees from using any information or skills gained during their time of employment for any other employer in the next fifty years in the provinces of Ontario, Quebec, Alberta, and British Columbia. A court would likely disallow the NDA in part, if not in its entirety, because it is too restrictive on the employee’s ability to make a living.
A well-drafted NDA can help a business maximize its proprietary interests. However, business owners should keep in mind that a well-written NDA is only as good as it is reasonable. If you are interested in ensuring the validity of your NDA, consult Hazlo Law – Business Lawyers today.
This article is for informational purposes only and does not constitute legal advice. If you wish to discuss your issue with a lawyer, contact Hugues today. 613-747-2459 ext.304, [email protected]