1. What Is a Non-Disclosure Agreement?
2. The Parties to the Agreement

A disclosing party is anyone involved in a non-disclosure agreement that provides confidential information to another party. Both parties agree to keep the information outlined in the agreement within the scope of the relationship and not provide it to anyone outside of that relationship under any circumstances.

It is crucial that all parties involved in a non-disclosure agreement understand the terms and what could be at stake should the contract be broken.

What Is a Non-Disclosure Agreement?

A non-disclosure agreement is also often referred to as a confidentiality agreement or a secrecy agreement. This is a legal agreement between two or more parties that lays out all the information that all the parties consider confidential. All parties agree that no one will disclose this information under a non-disclosure agreement.

The party that discloses the information is referred to as the disclosing party. The party receiving the information is known as the receiving party.

A non-disclosure agreement can be used in many ways. This kind of document is very commonly used with employers and employees. It is also used in other contexts, such as with independent contractors, those entering business relationships, or suppliers.

With regard to employment, a non-disclosure agreement is ideal because the employer can provide confidential information freely without worrying about the employee disclosing it to someone outside the company. Examples of confidential information include:

  • List of clients
  • Specific techniques
  • Marketing strategies
  • Strategic plans
  • Proprietary relationships

A non-disclosure agreement also binds the receiving party throughout the agreement and usually for a period of time afterward. This means the receiving party may not disclose any confidential information outside the relationship even once it is terminated.

For instance, if an employee is the receiving party, he or she will have to abide by the non-disclosure agreement throughout employment and for some time after the employment period ends.

If used properly, a non-disclosure agreement is very effective in keeping confidential information safe. Those entering into a non-disclosure agreement need to think about the different clauses that go along within the scope of the agreement.

The Parties to the Agreement

A non-disclosure agreement requires specific criteria be met so that it can be an enforceable document. These criteria are known as the elements of a contract.

The Restatement of Contracts states that there are four elements that are necessary for a legal contract to be valid:

  1. Agreement: an agreement that is mutual between all parties
  2. Consideration: a promise that is supported by something valuable that is exchanged
  3. Contractual capacity: all parties can understand that they are entering into a binding contract
  4. Lawful object: the object outlined in the contract is lawful

Although these elements are required for a contract to be lawful and enforceable, a good contract needs to also include additional details to decrease the likelihood of any disputes in the future should there be a disagreement in the relationship.

The clear identification of parties is one of the most crucial aspects of a non-disclosure agreement.

While contract law refers to the parties in a contract as the offeror and the offeree, non-disclosures consider them the disclosing party and the receiving party. This is because the law is somewhat different with regard to the overall purpose than other types of contracts.

Unlike other contracts, a non-disclosure agreement does not generally include any exchange of goods and services. This contract is about keeping information secret, essentially. There is no exchange of anything of monetary value.

One party in the contract is promising to keep information a secret during the course of the relationship if they will need said information for the purpose of a job, project, or transaction.

There are also non-mutual non-disclosure agreements. This is when only one party is disclosing secret information. For example, a non-mutual agreement can be used in an employee contract or for someone who wants to pitch ideas to an investor without fear of them using those ideas outside of their agreement.

These are both scenarios in which only one party is providing confidential information and, in turn, is the only one at risk should that information be shared outside the agreement.

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