Why you need carefully crafted nondisclosure agreement

Nondisclosure agreements (NDAs), sometimes known as confidentiality agreements, are widely used by businesses of all sizes. They help business owners protect their proprietary information and ideas as well as sensitive information about the company, its customers and employees.

These agreements derive their power from their ability to hold people legally and financially responsible if they share information they've agreed not to. That means that an NDA has to stand up in court if it's challenged. Therefore, NDAs have to be drafted and executed correctly.

There are plenty of boilerplate NDA templates available online. However, a "one size fits all" agreement won't protect you in the way that one drawn up with your organization's unique needs and concerns will.

Ambiguity is not your friend in a legal document. Courts can and do void agreements for being too vague. If a signer (also known as the Recipient Party) can't be expected to understand precisely what terms they agreed to, they probably can't be held liable for violating them.

Further, if an NDA is so broad in its terms that it places an undue burden on the signer, it may be unenforceable. It's essential to strike a balance so that you protect your information while still being fair to those who sign your NDAs.

There are a couple of other key things to keep in mind when drafting an NDA:

  • Include language specifying what third parties the signers can disclose proprietary information to when necessary.
  • Include reasonable time limits for how long the information needs to be kept confidential. Some proprietary information can be disclosed after a period. For example, if the information involves a new product you're developing that you don't want your competitors to know about, once it's on the market, it's not a secret.

Once you have your NDA(s) finalized, it's essential to know when to have people sign them. Some business owners postpone this task until after they've disclosed information to an employee, contractor or another person. Get the agreement signed before any sensitive or proprietary information is disclosed.

Be sure to consult with a Chicago attorney experienced in business litigation on NDAs and all of your other business contracts. With sound legal guidance, you can minimize costly legal disputes later on.

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