Every business or service has a “Unique Selling Proposition” (USP) that helps it stand out from its competitors and survive, whether it be a business process, trade secret, or marketing technique. Being sensitive in nature, there poses a threat to the business if this information, being the USP, is disclosed by its stakeholders, like employees or other businesses they are working with, to a third party. This may result in the business incurring unnecessary losses or worse. To prevent such situations and indemnify the business against these unforeseen contingencies, the party or business disclosing confidential or sensitive information must enter into a Non-Disclosure Agreement (NDA) with its related parties.
A Non-Disclosure Agreement is a legally binding contract that establishes a confidential relationship. The party or parties signing the agreement agree that sensitive information they may obtain will not be made available to any others. An NDA may also be referred to as a confidentiality agreement. It can be summarized as an acknowledgment of a confidential relationship between two or more parties and prevents the information they’ve shared in the normal course of business from being disclosed to others. The party which violates such an agreement in any way is legally obligated to compensate the other party, pay the due damages, or whatever else that might be outlined in the agreement.
Importance of Non-Disclosure Agreements
Whenever a business entity is engaged in an important commercial discussion, it is always important to ensure an NDA is signed between the parties which instills a degree of trust and confidence, which in turn can assist in open negotiations. This would ensure optimal transparency and best results for the business as complete information could be conveyed to other parties without fear of being misused.
As stated above, the signing of an NDA grants more trust between the parties and ensures that despite heavy negotiations, agreements, disagreements, the information is protected at all times. It deters the theft, misuse, misrepresentation of intellectual property.
NDA is signed at the very beginning of the negotiations between business entities, even when it is still uncertain as to whether the parties will agree to come together to enter into a business agreement. In such circumstances, information is shared between parties in order to make evaluations, analyze the market, make predictions about the future project. In the event that the deal falls apart at the negotiation stage, the parties can be sure that the shared data will not be used against them or transferred to third parties. Irrespective of the fact whether or not the ultimate business deal is entered into or not, a Non-Disclosure Agreement is signed beforehand.
NDA is also important to protect information from being misused or shared with a third party by an intern or an employee of a business entity. It comes in handy to keep the internal information of an organization truly confidential and barring people from discussing it with others not only while they are engaged with it but after having completed their tenures.
The main intent behind the signing of an NDA is to protect the sensitive information shared, therefore it ensures that the privacy and confidentiality of information shared is safe as it reduces the scope of breach of any disclosures which will give the aggrieved party a resort to suing the other party.
Since NDA is a legal document, it is of immense importance for avoiding and resolving any conflict that might arise in the future. The other party can be anyone, an organization’s own employees, or some other business or individual. Any party infringing the agreement would be legally liable to compensate for damages. It clearly states (in written format), anything that comes under the bracket of ‘confidential’, in the long run avoiding any ambiguity or loss of information. Overall, an NDA protects disclosures of intellectual property (including trade secrets, proprietary information and other confidential information), safeguarding a business entity as a whole.
