Non disclosure agreements (also called NDAs) are contracts that define confidentiality terms between two business entities or employees. NDAs prevent people from releasing confidential material or trade secrets while employed or doing business with a company. NDAs are common in many business contracts between partners, employees, service providers, and contractors. Here’s what you should know about non disclosure agreements and how they work in Florida.
What’s the Purpose of an NDA?
NDAs allow companies to share sensitive information with business partners, individuals, and employees with the legal backing that someone cannot share company secrets with competitors or the public. It also may help prevent ex-employees from using proprietary information to start a competing business.
Types of NDAs
Non disclosure agreements can be drafted as stand-alone documents or included as a general business contract clause. There are two different types of NDA agreements. Unilateral agreements, called “non mutual” agreements, state that one party must keep certain information private. With a unilateral non disclosure agreement, only one person is bound to the terms of the NDA. This type of NDA is commonly used in new employee contracts. Mutual NDAs bind both parties to confidentiality for specific aspects related to the business. Mutual NDAs are common when forming new partnerships and acquiring or selling a business.
What Does an NDA Cover?
Non disclosure agreements cover a wide range of proprietary company information that someone may access due to employment or partnership. Proprietary information may include:
- Product development and research
- Marketing strategies
- Computer programs
- Client or customer demographics
- Intellectual property
- Trade secrets
- Customer contact information
- Financial information about customers and the company
What Happens if You Break an NDA?
If you willfully shared information subject to your non disclosure agreement, the company that had you sign the agreement may sue you. This is because you would have breached the contract you made with them. When the company sues you, you may need to pay a fine. You may lose your job with the company if you’re a current employee. You may also need to pay damages if your breach of contract caused the company to halt production or required extensive changes to the company’s marketing strategy.
What Should You Include in an NDA?
Non disclosure agreements are legally binding contracts, so they must have the essential elements of every business contract. This includes:
- Offer—An action exchanged for value, such as making something, working, or offering a service.
- Consideration—the item of value, such as money.
- Acceptance —Both parties must acknowledge that they agree with the contract.
- Mutual agreement—both parties must recognize they understand the terms stated in the contract.
Enforcing an NDA
For an NDA to be enforceable, it must follow requirements such as having a defined duration, limited focus, and detailed scope. NDAs also need to include specific elements to make them legally binding:
- Duration—The agreement must discuss when the non disclosure agreement will be in effect.
- Specificity—The contract must state what confidential information and materials cannot be shared.
- Exclusions and exemptions—If exemptions exist, they must be carefully and thoughtfully included in the non disclosure agreement.
- Defend Trade Secrets Act (DTSA) Notice—Federal regulations require all contracts that discuss confidentiality and trade secrets to include a particular disclosure. This statement defines trade secret terms and protects the unlawful sharing of proprietary information.
Peppler Law. P.A.—Orlando Business Attorney
Creating and enforcing non disclosure agreements can be complicated. That’s why it’s best to have a business attorney like Thomas R. Peppler help guide you through the process. Call our Oviedo, Florida, office today to discuss your case.