Confidentiality agreement (NDA): when to use it
A confidentiality agreement, or NDA, protects sensitive information shared in negotiations and partnerships. Knowing when and how to use it usually prevents the improper exposure of strategic data.
What is an NDA
NDA is the acronym for non-disclosure agreement. It is an instrument by which the parties undertake to keep confidential the information exchanged in a given context. It may be unilateral, when only one party discloses data, or mutual, when both share sensitive information. Its central purpose is to define what is confidential and how it may be used.
When it tends to be used
Its use is common in situations in which strategic information needs to be shared before or during a relationship, such as:
- Negotiations of partnerships, mergers or acquisitions
- Engagement of suppliers and service providers
- Discussion of projects with potential investors
- Joint development of products or technologies
- Selection processes involving access to sensitive data
Clauses that deserve attention
The effectiveness of the agreement usually depends on clear definitions. Defining what constitutes confidential information, the confidentiality term, the permitted purposes of use and the exceptions tends to prevent doubts. It is also customary to address the return or destruction of data at the end of the relationship and the consequences in the event of a breach, always observing the applicable legislation, including data protection law.
Limits of the NDA
The agreement does not protect everything automatically. In general, information already public or obtained from a legitimate independent source tends to fall outside the confidentiality. In addition, disclosure obligations imposed by law or a competent authority usually prevail. For this reason, it is important to adjust expectations: the NDA reduces risks, but it does not replace other measures to protect information.
Frequently asked questions
Does the NDA need to be signed before any conversation?
As a good practice, the agreement is usually signed before sharing truly sensitive information. The earlier confidentiality is established, the smaller the discussion tends to be over what has or has not already been protected. Even so, the ideal moment depends on the stage of the negotiation and the nature of the data involved.
How long does the confidentiality obligation last?
It depends on what the parties agree. It is common to define a confidentiality term that may extend for a period after the end of the relationship. For certain information, such as trade secrets, more lasting protection may be provided for. The definition of the term usually varies according to the sensitivity of the data and the parties' interest.
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