An NDA is a confidential contract that legally binds parties to a specific relationship. The parties signing it agree not to share information with other people. In other words, they need to know what information they’re getting. A non-disclosure agreement is typically used by businesses when negotiating with other companies. It prevents them from sharing sensitive information with potential competitors.
The purpose of the NDA is to protect the interests of both parties involved in the deal. In most cases, it prevents the release of details about the other party’s plans or business processes. New employees are also required to sign an NDA if they have access to company information that is sensitive. For some companies, this applies to everyone. On the other hand, for others, only certain types of employees are required to sign the contract.
Before a company begins negotiations with potential investors, it usually uses an NDA to prevent potential competitors from obtaining its business plans or trade secrets. However, many investors might not sign such contracts because they might prevent them from doing business with other companies. Most investors also don’t want to sign contracts even after a potential investment opportunity has been declined.
The information that’s being protected includes a company’s sales plan, marketing strategy, and potential customers. If the other party’s actions violate the terms of the contract, they can take legal action to prevent further disclosure.
Information Protected By NDAs
- Customer Information
The information being protected includes details about a company’s major customers, as well as their preferences and contact information.
- Finance Information
Certain financial information not required to be disclosed, such as customer information, is protected. This type of information is often related to cost accounting concepts.
- Intellectual Property
Besides patents, other types of intellectual property, such as trade secrets and copyrights, are also protected.
- Marketing Information
Marketing-related information includes advertising techniques, pricing strategies, and processes.