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What is a Nondisclosure Agreement?

A non disclosure agreement (NDA) is a contract in which one or more parties agrees to not share any confidential information with outside parties. Businesses often use non disclosure agreements to protect themselves in employer/employee relationships. This type of employment contract protects the business' trade secrets by keeping all confidential information private between the employee and the business.

Nondisclosure agreements can be mutual or unilateral. In the above example, a unilateral NDA is common in employment contracts. A mutual NDA is an agreement between both parties that says neither one will disclose confidential information about the other to third parties or the public.

Nondisclosure agreements are also commonly used in real estate, entertainment, private aviation, and a slew of other areas where private information is shared. Laws and penalties vary when someone breaks the agreement and is in breach of contract. In some situations, breach of contract can be seriously injurious, and severe consequences may follow.

What is Included in a Non Disclosure Agreement?

Regardless of the intended use of the nondisclosure agreement, it should contain a few specific sections, including the following:

  • Definitions of Confidential Information: The NDA should specify the types of information that is included in the agreement, without leaking precise information. For instance, a film studio might include a statement on confidential information that includes the details of movie scripts, as well as the names of celebrities and their personal habits.
  • Exclusions of Confidential Information: An NDA may also exclude some information that is already considered common knowledge.
  • Obligations: This section should spell-out exactly what is expected of each party. For instance, it should say that you can’t breach the agreement, you can’t persuade others to breach the agreement, and you can’t help others access the information.
  • Time Periods: An outlined time period, such as ten years, requires the person receiving the information to keep it confidential until the time period expires. This information is commonly up for negotiation.

Some courts in various states have taken issue with standard boilerplate provisions included in many NDA’s. For instance, if a definition includes “any and all information” regarding the company’s business, a court may say this language is overly broad and unenforceable.

What Can You Expect If You Violate the Non Disclosure Agreement?

The legal recourse and outcomes vary drastically in situations involving the violation of a nondisclosure agreement. In some cases, nothing happens at all. In other scenarios, this type of breach of contract has cost millions in damage, not only to the plaintiff, but also to the breaching party’s wallet. The risk and threat of being sued for breaking an NDA is very intimidating to most people. This simple fact has caused courts in the last year to reexamine NDAs and cases involving sexual harassment.

Some companies do not pursue lawsuits against employees for violating a non disclosure agreement because of the sheer cost of going to court. If a company chooses to seek damages, the court will need to measure the amount of losses suffered by the plaintiff. For instance, if a trade secret was leaked, the court would measure the profits that the competitor earned from the trade secret, or the profits that the plaintiff lost because of the leaked trade secret.

You may also have to pay the opposing party’s attorney’s fees if the court finds an occurrence of breach of contract. Punitive damages are possible, but less likely. In cases of spite, ill will, or disregard for probable injury (known as “willful and malicious”), punitive damages may be awarded to punish one side for severe misconduct. Cases that involve a party intentionally breaking a nondisclosure agreement, may be subject to stiffer penalties.

In terms of criminal penalties, jail time is highly unlikely, except in cases with special circumstances, such as fraud, or cases that involve a court order. Loss of future job prospects, job termination, mandatory restitution of the value of the stolen information, and financial penalties are common outcomes in non disclosure agreement lawsuits. An employment lawyer will be able to give you more information on the specifics of your case, and any possible penalties that a lawsuit could yield.

What Should I Do If I Have Been Accused of Violating a Non Disclosure Agreement?

If you have been accused of violating a non disclosure agreement, you should contact an employment lawyer near you as soon as possible. An experienced attorney will review your contract, advise you of your rights, and they will help you to develop a strategy to protect yourself. In the event your case goes to arbitration or court, your attorney will represent your best interests throughout the legal process.

Photo of page author Sarah Tipton

, LegalMatch Legal Writer

Last Modified: 08-09-2018 08:47 PM PDT

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