Non-Disclosure Agreement – Definition

Cite this article as:"Non-Disclosure Agreement – Definition," in The Business Professor, updated December 14, 2018, last accessed October 28, 2020,

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Non-Disclosure Agreement (NDA) Definition

A non-disclosure agreement is a legal contract that creates a confidential relationship between two or more parties. According to this contract, the information shared among these parties cannot be made available to any party other than the parties involved in this agreement. This is also called confidentiality agreement, confidential disclosure agreement or propriety information agreement.

A Little More on What is a Non-Disclosure Agreement (NDA)

NDA is a written contract signed by all the parties involved in order to make sure no information or knowledge covered under the agreement is revealed to a third party. A non-disclosure agreement is often signed by two companies engaged in a business transaction. This agreement makes sure the confidential information and knowledge about the business processes of the involved companies are not revealed in public.

Employers may also want their employees to sign a non-disclosure agreement while the employee is hired for a job that has access to the sensitive information. By entering into this agreement, an employee agrees to keep this information secret and not to reveal it to anyone outside the company.

A company may also ask individual contractors or vendors who have access to the company’s trade secret, business innovation, or propriety software to sign a non-disclosure agreement.

Signing a non-disclosure agreement is a common practice by many companies operating across different industries. The information covered under non-disclosure agreement includes marketing strategy, sales plan, manufacturing technique, existing or potential customer list, intellectual property, innovative ideas, and others.

The parties involved in a non-disclosure agreement are legally obligated to follow the terms of the agreement, failing to do so may invite monetary fine. On such occasions, the other parties may legally challenge them in court and demand financial compensation for the damage.

A non-disclosure agreement may have several elements according to the particular need, but typically an NDA must have six main components. Those components are the names and details of the parties involved, the definition of what constitutes a confidential information, exception from confidential information, the obligation of the parties, time period of the agreement’s validity and miscellaneous.

At the beginning of an agreement, it must be defined who are the parties involved in the agreement. It should mention their names and addresses clearly.

Following that there needs to be a section detailing what type of information is considered confidential in this agreement. This should be written in a way so that the actual information doesn’t get revealed. Then there should be a section stating what are the exceptions from that confidentiality terms.

The next section should clearly mention what are the obligations under that specific agreement. The time period of the agreement is required to be mentioned clearly at the end of the agreement. Also, any other information that may be deemed important should be included in a non-disclosure agreement.

A non-disclosure agreement is a legal document, but it must be written in a straightforward easily understandable language for the ease of the parties involved.

Academic Research on Non-Disclosure Agreement (NDA)

Non-Disclosure Agreement in the Process of Protection of Intangible Property, Widerski, P. (2017). Zeszyty Naukowe Wyższej Szkoły Finansów i Prawa w Bielsku-Białej, (3). A legal idea of a non-disclosure agreement (NDA)/confidential disclosure agreement (CDA) is explained in this paper. Protecting a company’s confidential information is a key operational element. Careless protection of a secret might lead to great financial and image losses in every firm. This paper takes an attempt to explain both statutory and contractual legal structures used to safeguard the organization’s trade secrets. The characteristic of a non-disclosure agreement as an innominate agreement was explained. The position of such agreements both in the national and international legal system was also included.

A critical assessment of the NonDisclosure Agreement in the framework of the technology transfer process: A longitudinal study, Meysman, J., De Cleyn, S. H., & Braet, J. The Journal of Private Equity, 18(2). In the transitional era toward knowledge-intensive economies, knowledge and information have become essential goods. Although the protection of secret information is now a major topic of concern. The topic of touching and influencing day-to-day business life is confidentiality and the use of the non-disclosure agreement (NDA). This study aims to provide a real review of the most requisite and common elements of the NDA within the technology transfer process which goes beyond the scope of industry or country. The creation of the content of the average NDA is analyzed.

The importance of having a nondisclosure agreement, Klee, M. M. (2000). IEEE engineering in medicine and biology magazine, 19(3), 120. A common way companies and individuals guide their intellectual property is through non-disclosure agreements (NDAs). A lot of these categories are assigned daily all over the world. In comparison to patients, cases which involves NDAs are quite rare. However, as the recent case of Celeritas Technologies vs. Rockwell International shows, when litigated, even more than a patent, an NDA can be more valuable. The Celeritas case involved the hot area of wireless communication systems.

The realities of relying on doctor-patient nondisclosure agreements for reputational protection, Butler, T. J. (2009). Health Law., 22, 23.

Silence at Our Expense: Balancing Safety and Secrecy in NonDisclosure Agreements, Philip, R. M. (2002). Seton Hall. L. Rev., 33, 845.

Hidden Costs to Homeowners: The Prevalent NonDisclosure of Yield Spread Premiums in Mortgage Loan Transactions, Hong, P. J., & Reza, M. (2005). Loy. Consumer L. Rev., 18, 131.

Employee beware: The irreparable damage of the inevitable disclosure doctrine, Matheson, J. H. (1997). Loy. Consumer L. Rev., 10, 145. People now shop for employment just like the way they shop for good and services. The at-will employment doctrine guiding an employee and the employer give the employee the freedom to terminate his/her contract for a better offer. The consumer protection law regulate and protect the workers’ health condition, working environment, safety, and even their wages. But in contrast, the trade secret law favors the employers by depriving or limiting their workers the freedom to work for another employer who might be a competitor to their previous employer.

Beyond the Route 128 Paradigm: Emerging Legal Alternatives to the Non-Compete Agreement and Their Potential Effect on Developing High-Technology Markets, Carey, K. L. (2001). J. Small & Emerging Bus. L., 5, 135. This Article examines whether non-competition covenants and overbroad trade secret laws operate to restrict innovation and impede the growth of small, creative businesses -especially those founded by former employees of larger, established companies. We summarize the nascent scholarship around these issues and pose several questions for future research by legal scholars and economists. We then critically analyze aspects of non-competition, fiduciary duty, and trade secret law bodies of law which we refer to as “the law of employee mobility” We conclude that reform in these areas would likely promote innovation, and we invite further discussion around these important but neglected areas of law.

Inevitable disclosure through an internet lens: Is the doctrine’s demise truly inevitable, Phillips, J. F. (2003). Wm. & Mary L. Rev., 45, 395.

Developing High-Tech Ventures: Entrepreneurs, Advisors, and the Use of NonDisclosure Agreements (NDAs), Fanimokun, A. O., Castrogiovanni, G., & Peterson, M. F. (2012). Journal of Small Business & Entrepreneurship, 25(1), 103-119. The preoperational stage of every business is a stage in which the entrepreneur does some research to gather information about the business and administrative technical know-how. This paper is based on the scope that entrepreneurs will base their decision making on their discretion and use secrecy with advisors who are close relatives (i.e., friends and family). Entrepreneurs will trust these advisors to keep their discussion secret without disclosing or discussing it with someone else and probably use non-disclosure agreements (NDAs) with professional consultants or business associates consulted. Analysis of the social capital perspective was done by examining 52 high-tech entrepreneurs use of NDAs with their advisors.


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