You should sign an NDA to secure your interactions with business partners, suppliers, vendors, employees, and others by keeping the shared information confidential and safe. As this official document obliges parties not to share important information with unauthorized parties, the answer to the question ‘Should I sign an NDA?’ is yes if you wish to achieve such confidentiality. 

Of course, this type of agreement has limitations and important aspects that any party signing it should know.  

What is a Non-Disclosure Agreement?

A non-disclosure agreement is a legally enforceable contract by which the signees are obliged not to share confidential information unless explicitly authorized. 

Other terms for this contract include proprietary information agreement, confidentiality agreement, and confidential disclosure agreement. 

It’s important to note that NDAs focus narrowly on confidentiality, which is one of the reasons why they are often signed with partnership agreements during the formation of partnerships to protect sensitive information shared between parties. 

Regardless of the terms, all confidentiality agreements in business have a few things in common:

• Signers

• Duration

• Definition (information and rules for maintaining its confidentiality)

• Scope

• Data disposal or Return

• Remedies

• Exclusions

Signing a non-disclosure agreement is widely practiced in the business world. First, businesses use it to ensure data confidentiality when cooperating with other businesses. Second, this document secures data shared between businesses and their employees before, during, and after signing settlement agreements to end the cooperation.

In addition to businesses, any parties sharing confidential information (e.g., societies, landlords, tenants, etc. ) can sign a non-disclosure agreement. For instance, NDAs might be part of separation or divorce proceedings and complement legal documents such as separation agreements to ensure confidentiality about financial or personal matters.

Proprietary information agreements also protect information about product development, intellectual property, and patents. 

Types of NDAs

Generally, there are two major types of confidentiality agreements—unilateral and mutual non-disclosure agreements. Both have the same legal force and necessary parts, such as duration, definition, scope, etc.  

However, unilateral agreements oblige only one side not to share confidential information, whereas multilateral agreements require all parties to keep sensitive data safe.

For instance, mutual confidentiality agreements may involve two companies merging, and a mutual NDA binds them to refrain from sharing information.

Another example of a mutual NDA includes two parties signing this agreement to prevent sharing personal or financial information with third parties alongside a prenuptial agreement when getting married or alongside a postnuptial agreement upon divorcing.

In addition, a unilateral NDA demands that only one party keep sensitive information, such as an employee in a company.

For those wondering, ‘Should I sign an NDA as an individual or company?’ the answer depends on whether you need to use a mutual or unilateral NDA.

On the other hand, those asking, ‘Should I sign an NDA before an interview?’ probably already know that they will use a unilateral NDA, as they are individual signees of an employment agreement. Nevertheless, they should examine NDAs thoroughly before signing to check for potential limitations or obstructions.

When Should You Sign an NDA?

You should sign an NDA to protect proprietary information in a new job before you access someone’s sensitive data or vice versa, as well as to protect patents, settlements, and real estate agreements.

If you ask yourself, ‘Should employees sign an NDA, or should I sign an NDA as a freelancer?’ you can check out the following details on signing this type of contract for this and other data protection purposes.

#1. Protecting Proprietary Information in a New Job

If you are a new employee in a company, your employer will probably ask you to sign a non-disclosure agreement. The reason for this is that businesses have confidential information that you will be able to access.

Keeping such data safe protects companies' interests, secrets, plans, and other vital aspects. Usually, you will need to sign an NDA along with your employment agreement.

#2. Accessing Sensitive Data

Businesses, employees, and clients sign proprietary information agreements when any party can access sensitive data. Such information may include trade secrets, information about companies’ structures or organizations (e.g., data found in an LLC operating agreement), data shared with suppliers, vendors, or clients, employee or client information, etc.

After they sign the contract, both sides have ensured that either no party will share sensitive data once they access it or that one party is obliged to keep such information safe. 

#3. Protecting Patents & Intellectual Property

Public disclosure of a forthcoming invention may void its rights, so signing an NDA is crucial for protecting it. This is important for both the inventor and the company that will use the patent. 

Companies’ intellectual property may also include unique software and tools that distinguish them from the competition. Third parties' use of such intellectual property may endanger companies’ strategy, management, organization, or progress. 

#4. Protection of Settlement and Real Estate Agreements

Settlement agreements are contracts signed between businesses and employees (including sole proprietorships or LLCs and other business types) regarding employment termination. Once employees are no longer part of a company, businesses prefer they don’t share anything confidential they learned during their employment.

The same applies to not sharing the settlement agreement contract information and stipulations. In both cases, signing an NDA will ensure that parties put the data in place for safekeeping.

Real estate negotiations between landlords and tenants may also involve sensitive information that requires signing both a lease agreement and a non-disclosure agreement. Similarly, the seller and the buyer may add an additional security layer to a purchase agreement by signing an NDA. 

What is ‘Confidential Information?’

Confidential information is any data that one party discloses to another, both private and non-public.

It may imply any specific details about the leading company affairs, such as:

It is important to know the limits of NDAs and their effectiveness. In other words, some information is excluded from NDAs as it does not need to be kept confidential:

What is a Breach of an NDA?

A breach of an NDA is a violation of a contract by either or both parties. It happens when a party goes against any terms stipulated in an NDA. Non-disclosure agreements are legally enforceable documents, which means that one of the parties can take legal action in case of breaking an NDA.

Here are the most common remedies a disclosing party can use:

5 Potential Red Flags in NDA You Should Look Out For

Non-disclosure agreement signing should always be carefully considered, as some contracts may carry elements that can cause potential repercussions.

Let’s see what they are and how to identify them:

#1. Overly Broad or Ambiguous Language

Overly broad or ambiguous language can create more opportunities for an accidental NDA breach. This is because you may not be aware of the definition of confidential information. For instance, a company may mark all email and other data shared between parties electronically as confidential. Such a stipulation deems every single piece of information confidential.

Instead, a contract should stipulate that only special emails or similar written data should be kept safe. This further defines confidential information and narrows the possibilities for accidental violations.

#2. Unreasonable Timeframes

NDAs may impose unreasonable timeframes for certain confidential information. While some confidential data should be kept safe for an extended period due to its nature (e.g., long-term business plans), others shouldn’t.

For example, modern technology information is typically deemed short-term confidential due to the fast-paced advancements and changes in this domain. A long-term NDA with this confidential information can be considered unreasonable and unfair.

#3. Lack of Mutual Obligations in a Mutual NDA

Parties may sign a mutual NDA with disproportionate obligations, which can create obstacles and setbacks for one party. For instance, two businesses may cooperate and share sensitive data among themselves.

Obliging only one party to keep the information safe creates an imbalance in an agreement and disadvantages that party, especially if the data is essential for company operations or further negotiations. 

#4. Clauses That Could Harm Your Future Opportunities

NDA clauses may impose unrealistic restrictions, which can endanger your future endeavors. This can be regarded as a disguised non-compete agreement. In general, non-compete agreements prevent you from working for your employer’s competitors, at least for a particular time after you leave the company.

However, companies may require employees to sign an NDA, deeming even the most minor job details confidential. This means that an NDA obtains terms from a non-compete agreement and may prevent you from doing the same job in the whole country or even anywhere else or prevent you from working on the same job years after you leave the company.

#5. Unfair or Unclear Breach Remedies

You should learn about NDA violations before you ask, ‘Should I sign an NDA?’ Such a contract may have harsh punishments or remedies for failing to keep confidential data safe.

For instance, an NDA may have a breach penalty involving liquidated damages. Liquidated damages compensate for any potential losses of a disclosing party, which both signees agree upon. Still, if the potential losses are less than the value of stipulated liquidated damages, the NDA agreement has unfair breach remedies.

What Happens if You Don’t Want to Sign an NDA?

If you don’t want to sign an NDA, you won’t face legal consequences, as no one can force you to sign this document. Sometimes, one of the parties finds an NDA necessary for collaboration and won’t take further steps if the other party is unwilling to sign it. 

For instance, a business may not hire you if you refuse to sign an NDA, which may be a mandatory part of the hiring process. This is why the question, ‘Should I sign an NDA?’ is crucial here.

By examining the terms of the document, you can determine whether signing it is worth it. There are ways to sign an NDA safely and make this document serve its genuine purpose, which is data protection and smooth collaboration.

4 Practical Tips for Signing an NDA Safely

Signing an NDA safely will help you avoid limitations preventing you from working for other employers or using information necessary for business development.

Let us examine the most useful tips to have in mind when deciding if you should sign an NDA.

#1. Use a Reliable NDA Template

Before all else, you should focus on the NDA document form. First, you will need to select the correct NDA version. 

A good way to do this is to use our non-disclosure agreement builder. With it, you can choose from various NDA state versions and pick the most suitable one. Also, the builder ensures reliability by including all the essential components required for a legal and enforceable NDA.

On top of this, the tool is simple and easy to use, so you can obtain an NDA quickly and hassle-free. Not only will our NDA generator save you time, but it may also be cost-saving compared to other ways of getting hold of this document.

#2. Negotiate Terms

NDA risks and benefits are directly related to NDA terms and conditions. That’s why negotiating terms is vital for better protection.  For instance, you can negotiate penalties for breaches to ensure they are reasonable and not overly punitive.

The same applies to reaching an agreement where both sides will be equally obliged to keep information confidential in case of a mutual agreement. Failing to ensure this may create an imbalance and cause repercussions.

Depending on what you want to achieve, you may or may not wish for some terms to be explicitly stated. For instance, you can ask the other party to include provisions on severability, meaning that parts of an agreement can remain valid if some other parts are unenforceable or illegal.

#3. Consult With a Professional

Getting legal advice for NDAs from a professional is another way to remain safe when signing this document. A professional will advise you whether you should sign an NDA but can also help you generate this document to fit your needs or negotiate terms.

Of course, hiring a professional when signing an NDA implies costs that may sometimes be higher than using tools to create such documents.

#4. Use Precise and Concise Language

Clearly stating all the terms is essential for ensuring that both parties understand their rights and obligations and that the agreement is compliant. An agreement should not contain additional provisions, such as non-compete agreements, unless necessary.

Most importantly, a proprietary information agreement should not be too broad or vague, as this increases the chances of misinterpretations and breaches and further leads to disputes.

Final Thoughts

Non-disclosure agreements are crucial for protecting sensitive data. Businesses use such agreements to keep information shared with other businesses and employees confidential. When wondering if you should sign an NDA, it’s important to check the safety, enforcement, and terms. 

This is because the terms may not be fitting for both parties, and NDAs can create room for possible breaches or create an imbalance affecting one or both parties. To avoid such situations and disputes, you can use reliable online software like Contracts.net tools to pick the correct NDA version and create NDAs with the proper form. 

Also, the keys to signing an NDA safely are hiring a professional for help, negotiating terms according to your needs, and ensuring the agreement is short but precise. 

Should I Sign an NDA FAQ