In today’s competitive business environment, protecting sensitive information is paramount. A Non-Disclosure Agreement (NDA) serves as a critical legal document to safeguard confidential information shared between parties. Whether you are entering into a partnership, hiring a new employee, or collaborating with another business, an NDA ensures that your proprietary information remains secure. This article provides a comprehensive guide on how to create an NDA, detailing essential sections and clauses, as well as additional optional clauses.
Important Sections and Clauses in an NDA
1. Introduction
The introduction should clearly state the purpose of the NDA. It identifies the parties involved and provides a brief overview of the agreement’s intent to protect confidential information.
Example: “This Non-Disclosure Agreement (“Agreement”) is made and entered into by and between [Disclosing Party] and [Receiving Party] to ensure the protection and confidentiality of certain proprietary and confidential information.”
2. Definitions
This section defines key terms used throughout the NDA. Common terms include “Confidential Information,” “Disclosing Party,” “Receiving Party,” and any specific types of information that need to be protected.
Example: “Confidential Information includes all data, materials, products, technology, computer programs, specifications, manuals, business plans, software, marketing plans, financial information, and other information disclosed or submitted, orally, in writing, or by any other media.”
3. Obligations of Receiving Party
This clause outlines the obligations of the receiving party in handling and protecting the confidential information. It specifies the level of care required and the measures to be taken to ensure confidentiality.
Example: “The Receiving Party agrees to use the Confidential Information solely for the purpose set forth in this Agreement and to take all reasonable precautions to prevent any unauthorized disclosure of the Confidential Information.”
4. Exclusions from Confidential Information
This section lists circumstances under which the confidential information is not protected under the NDA. Common exclusions include information that is publicly known, already known to the receiving party, or independently developed by the receiving party.
Example: “Confidential Information does not include information that is: (a) in the public domain at the time of disclosure; (b) known to the Receiving Party at the time of disclosure; (c) independently developed by the Receiving Party without use of or reference to the Disclosing Party’s Confidential Information.”
5. Duration of Confidentiality
This clause specifies the duration for which the confidentiality obligations will remain in effect. The duration can vary depending on the nature of the information and the agreement between the parties.
Example: “The confidentiality obligations set forth in this Agreement shall remain in effect for a period of [number] years from the date of disclosure.”
6. Permitted Disclosures
This section details any exceptions to the confidentiality obligations, such as disclosures required by law or court order, and specifies the conditions under which such disclosures can be made.
Example: “The Receiving Party may disclose Confidential Information if required to do so by law, provided that the Receiving Party gives the Disclosing Party prompt written notice of such requirement prior to any disclosure.”
7. Return or Destruction of Materials
This clause requires the receiving party to return or destroy any confidential materials upon termination of the agreement or upon the disclosing party’s request.
Example: “Upon termination of this Agreement, or upon request by the Disclosing Party, the Receiving Party shall promptly return or destroy all Confidential Information and any copies thereof.”
8. No License
This clause clarifies that the NDA does not grant the receiving party any rights or licenses to the confidential information beyond what is expressly stated in the agreement.
Example: “Nothing in this Agreement shall be construed as granting or conferring any rights by license or otherwise in any Confidential Information disclosed hereunder.”
9. Remedies
This section outlines the remedies available to the disclosing party in case of a breach of the NDA by the receiving party, including injunctive relief and monetary damages.
Example: “The Receiving Party acknowledges that any breach of this Agreement may cause irreparable harm to the Disclosing Party, and that the Disclosing Party shall be entitled to seek injunctive relief in addition to any other remedies available at law or in equity.”
10. Miscellaneous
This section includes various standard clauses such as governing law, dispute resolution, and entire agreement. These clauses ensure that the NDA is enforceable and covers all necessary legal bases.
Example: “This Agreement shall be governed by and construed in accordance with the laws of [State/Country]. Any disputes arising out of or in connection with this Agreement shall be resolved through binding arbitration in [Location].”
Good-to-Have Clauses
1. Non-Solicitation
This clause prevents the receiving party from soliciting or hiring the disclosing party’s employees or contractors for a specified period.
Example: “The Receiving Party agrees not to solicit or hire any employees or contractors of the Disclosing Party for a period of [number] years following the termination of this Agreement.”
2. Non-Compete
This clause restricts the receiving party from engaging in competing activities with the disclosing party for a specified period.
Example: “The Receiving Party agrees not to engage in any business activities that directly compete with the Disclosing Party’s business for a period of [number] years following the termination of this Agreement.”
3. Amendments
This clause specifies the process for making amendments to the NDA, ensuring that any changes are mutually agreed upon and documented.
Example: “This Agreement may only be amended or modified by a written agreement signed by both parties.”
4. Severability
This clause ensures that if any provision of the NDA is found to be unenforceable, the remaining provisions will still be valid and enforceable.
Example: “If any provision of this Agreement is held to be invalid or unenforceable, the remaining provisions shall remain in full force and effect.”
5. Assignment
This clause prevents the receiving party from transferring their obligations under the NDA to another party without the disclosing party’s consent.
Example: “The Receiving Party may not assign or transfer any rights or obligations under this Agreement without the prior written consent of the Disclosing Party.”
Creating an NDA Using Legitt AI
Creating a comprehensive and legally sound NDA can be time-consuming and complex. Fortunately, Legitt AI offers powerful tools to simplify this process. By using the Legitt AI Contract Generator, you can quickly generate a customized NDA that meets your specific needs. Visit Legitt AI Contract Generator to get started.
Once your NDA is created, you can easily e-sign the document using Legitt Sign. This electronic signature platform ensures that your NDA is legally binding and securely signed by all parties. For more information, visit Legitt Sign.
Additionally, Legitt AI offers a wide range of free contract templates that can serve as a starting point for your NDA. Access these resources at Legitt Free Contract Templates.
