Last Updated February 27, 2024
What is a Non-Disclosure Agreement (NDA)?
A Non-Disclosure Agreement (NDA) is an enforceable contract that ensures confidentiality and protects sensitive information shared between parties.
Individuals and organisations use Non-Disclosure Agreements to protect themselves and ensure that parties working with confidential information don’t disclose it to an unauthorised third party. By signing an NDA, parties agree to keep the other party’s information private. Breaking a non-disclosure agreement may result in the owner of the confidential information taking legal action.
LawDepot’s Non-Disclosure Agreement template is customised for the Australian Capital Territory, New South Wales, Northern Territory, Queensland, South Australia, Tasmania, Victoria, and Western Australia.
A Non-Disclosure Agreement is also known as:
- NDA agreement
- Confidentiality agreement
Who are the parties to an NDA?
There are two parties: the disclosing party, who shares confidential information to the receiving party, who receives the information for a specified purpose.
Either party can be an individual, multiple individuals involved in a partnership, or an organisation. For example, a software company may hire a freelancer/consultant and require that they sign an NDA, so client information remains confidential.
When can I use a Non-Disclosure Agreement?
Individuals and organisations may find NDAs helpful (and sometimes necessary) in settings related to employment, sale transactions, inventions, and more.
- Employment: A company may ask permanent or temporary hires (both employees and freelancers) to sign NDAs. Doing so can prevent employees from sharing important company information with the competition in your industry.
- Sale Transactions: Selling a business involves disclosing confidential information like client lists and financial accounts so that the potential buyer can carry out a due diligence review before deciding whether to proceed with the purchase. Such information must be kept strictly confidential, particularly if the transaction does not proceed.
- Inventions: An individual or company may require another party to sign an NDA when discussing an invention to protect the intellectual property of the original work (such as a product, recipe, or design).
Non-Disclosure Agreements are useful in countless other settings as well. It’s a good idea to create an NDA whenever you share sensitive information with another party. Doing so will establish the agreement and outline the potential legal actions if the confidential information is released. It will also create the right environment for whatever work needs to be done.
Confidential information can be any information that is not public knowledge and that the holder of the information wishes to keep private. Confidential information may include:
- Customer information, such as customer names, contact information, and transaction history.
- Intellectual property, such as the instructions, copyrights, patents, and trade secrets related to creating an invention or service.
- Marketing, product, and service information, such as research and production processes, pricing and billing policies, and marketing techniques.
- Business operations and accounting information, such as employer and employee names and contact information, financial reports, and internal cost information.
A party may request that any information shared with another party over the course of the relationship remain confidential and protected by a Non-Disclosure Agreement. However, there are limitations to what can be considered confidential information.
You cannot protect all types of information with an NDA. Information that is already known in your industry or becomes known through no fault of the receiving party cannot be protected by an NDA. Also, Non-Disclosure Agreements cannot protect information that is already rightfully known to the receiving party or disclosed and obtained from a third party.
Can I include more clauses in an NDA?
Yes, with LawDepot’s NDA template, you can include a non-compete and a non-solicit clause.
A non-compete clause restricts the receiving party from starting a company that competes with the disclosing party’s. However, this clause cannot prevent the receiving party from working for competitors.
A non-solicit clause is most common in Non-Disclosure Agreements for employees. This type of clause restricts the receiving party from hiring the employees of the employer (the disclosing party).
Can a Non-Disclosure Agreement be broken?
If you have signed a Non-Disclosure Agreement, you should be extremely hesitant to break the contract and leak any information. If you’ve signed an NDA and shared another party’s confidential information, they can take legal action against you.
Depending on the situation, the disclosing party can file lawsuits such as:
- Copyright infringement: The use of intellectual property without permission
- Misappropriation of trade secrets: The wrongful use of a trade secret
- Conversion: Intentional interference with someone's personal property
An NDA can detail the remedies of breaching a contract. For example, the agreement can state a specific amount of money the receiving party must pay if they disclose the confidential information. It might also say that damages are not an adequate remedy and that the disclosing party will be entitled to an injunction to prevent any further misuse of the information.
Do I have to sign a Non-Disclosure Agreement?
Your obligation to sign an NDA will depend on your personal circumstances. You cannot be coerced or forced to sign a legal document. However, your failure to sign could have consequences. For example, a potential employer may refuse to hire you if you don’t sign an NDA.
Do Non-Disclosure Agreements expire?
A Non-Disclosure Agreement can last indefinitely, or the disclosing party can specify a date when it will no longer remain in effect.