Disclosing Party Meaning in NDAs and Legal Agreements

Key Takeaways

• A disclosing party is the individual or entity sharing confidential information in a legal agreement, typically an NDA.
• Non-disclosure agreements (NDAs) protect sensitive information from being shared or misused.
• Disclosing parties must clearly define what constitutes confidential information and under what conditions it may be shared.
• NDAs can be mutual or unilateral, depending on whether one or both parties disclose information.
• The disclosing party’s rights and obligations often depend on the NDA’s scope, duration, and exceptions.
• Legal disputes may arise if the receiving party breaches the agreement, making clear contractual terms essential.
• It's crucial to differentiate the disclosing party from the receiving party to assign legal responsibilities correctly.
• Legal counsel can help draft NDAs that provide thorough protection and comply with relevant laws.

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.

What Does the Disclosing Party Do in an NDA?

In a non-disclosure agreement (NDA), the disclosing party is responsible for defining the scope of the confidential information being shared. This role includes specifying what qualifies as protected data, who is authorized to access it, and how long confidentiality must be maintained.

Key responsibilities of the disclosing party may include:

• Clearly identifying the confidential information — whether it’s business plans, proprietary formulas, customer lists, or trade secrets.
• Labeling materials appropriately, such as marking documents as “Confidential.”
• Limiting access by ensuring that only authorized personnel within the receiving party's organization can view the information.
• Specifying disclosure terms, including how and when the information may be used, and any exceptions (e.g., if the info becomes public through no fault of the receiving party).

By outlining these expectations, the disclosing party helps ensure legal protection if the confidentiality is breached. 

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. 

What Happens if the NDA Is Breached?

If the receiving party breaches an NDA, the disclosing party may suffer significant losses—financial, reputational, or strategic. Legal options typically include:

• Cease and desist orders to stop further disclosure.
• Injunctive relief to prevent ongoing or future breaches.
• Compensatory damages for economic loss or harm.
• Specific performance, requiring the receiving party to comply with the agreement's terms.

Courts will often consider the clarity and enforceability of the NDA’s language. That’s why legal precision in defining the disclosing party’s role and obligations is critical.

If you need assistance drafting or reviewing a non-disclosure agreement to protect your confidential information, you can consult an attorney through UpCounsel’s marketplace. 

Disclosing Party vs. Receiving Party: What's the Difference?

While the disclosing party provides the confidential information, the receiving party is the one who receives it and agrees to maintain its secrecy.

The distinction is vital for legal enforcement and determines each party’s rights and obligations under the agreement.

Common Scenarios Involving a Disclosing Party

Understanding the disclosing party meaning is crucial in various business and legal contexts, including:

• Startups pitching to investors — Founders often disclose proprietary ideas or product plans.
• Employers onboarding new hires — Employers may reveal trade secrets to employees subject to NDAs.
• Collaborative projects — Companies partnering on research or product development share confidential data.
• Vendor agreements — Businesses share operational processes or pricing structures with external contractors.

In each case, the disclosing party needs legal protection to maintain a competitive advantage and prevent misuse of their confidential information.

Key Legal Protections for the Disclosing Party

To safeguard the disclosing party, NDAs should contain clauses that:

• Define "confidential information" precisely to avoid ambiguity.
• Specify the duration of confidentiality, often ranging from two to five years or more, depending on the nature of the information.
• Include remedies and penalties for breach, such as injunctive relief or monetary damages.
• List exclusions, such as information already in the public domain or known to the receiving party prior to disclosure.
• Require the return or destruction of confidential materials upon termination of the agreement.

These provisions help minimize risk and provide a legal recourse if the receiving party violates the terms. 

Types of Non-Disclosure Agreements

Non-disclosure agreements fall into two broad categories based on the flow of information:

1. Unilateral NDA (One-way NDA):
   Only one party—the disclosing party—shares confidential information, and the receiving party agrees not to disclose it. This is common in employment, consulting, and invention submission scenarios.
2. Mutual NDA (Two-way NDA):
   Both parties disclose confidential information to each other and agree to maintain its confidentiality. This type is often used during mergers, joint ventures, or partnerships.

The choice between unilateral and mutual NDAs depends on the nature of the relationship and the business goals involved. 

Frequently Asked Questions

1. What is the disclosing party meaning in an NDA?
   The disclosing party is the individual or business sharing confidential information under a non-disclosure agreement.
2. Can both parties be disclosing parties?
   Yes. In a mutual NDA, both parties share confidential information and are considered disclosing parties.
3. What kind of information does the disclosing party protect?
   Trade secrets, business strategies, customer lists, intellectual property, and any information marked or agreed to as confidential.
4. What legal protection does the disclosing party have?
   Legal remedies may include injunctive relief, monetary damages, and enforcement of NDA clauses in court.
5. Do NDAs need to specify the disclosing party?
   Absolutely. Identifying the disclosing and receiving parties clearly ensures enforceability and helps avoid future disputes.

If you need help with understanding disclosing party meaning, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.