Let’s start with the first question.
What is a Non-Disclosure Agreement?
A Non-Disclosure Agreement (NDA) also known as a confidentiality agreement, is a legally binding document that outlines the rules for sharing and protecting confidential information.
It's used when businesses need to share sensitive information but want to ensure that the information remains confidential and is not disclosed to others.
In essence, an NDA is a formal promise not to share or use certain information without permission.
If someone violates the terms of an NDA by sharing the confidential information, there can be legal consequences.
NDAs are versatile legal tools used in various contexts, including business, research, and personal matters. They can cover a wide range of confidential information, such as trade secrets, proprietary technologies, financial data, business strategies, and even personal information.
What is the purpose of a Non-Disclosure Agreement?
The core purpose of an NDA is to create a legally binding commitment, with clear consequences for any breach, thereby discouraging unauthorised disclosure or use of the confidential information.
Here is some reasons for choosing to prepare an NDA:
- Encourages collaboration: Businesses heavily use NDAs to make partnerships, collaborations with other businesses or individuals.
This requires that both parties share their confidential information to collaborate together with each other. An NDA assures the confidentiality and this enables more open communication between teams and quality outcomes.
- Preventing losing a competitive edge: When businesses share important information about their products, research, designs to others, they want to make sure that this does not get into the wrong hands or hands of their competitors - where NDAs does exactly this by preventing others from exploiting the confidential information.
- Clearly outlines what happens in case of breach in agreement: An NDA clearly outlines what happens if either business violates the terms of the agreement. If the other part discloses the information, there is a way for the other business to get various forms of relief for the damages or take to legal action.
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We will be creating the document through Airstrip AI’s create custom document feature for free.
You can create your account for free, and this blog will guide you step-by-step on creating a personalised and lawyer-level NDA for your business. But it you just want to learn about what an NDA is and get an understanding about it, let's continue.Create this Non-Disclosure Agreement (NDA) using Airstrip AI
Create a Non-Disclosure Agreement
These are the points that should be available in any NDA to make sure that the agreement is accurate and covers all parts of the agreement between the businesses.
As mentioned, you can start your account with Airstrip AI and follow through step by step answering each question and creating your document - or if you just want to know what makes an accurate NDA, you can continue.
Providing the Initial information
Before we get started answering the questions, just add in the 2 basic information.
In this case, let’s create an NDA for an employee we are hiring. This step is the same for partnering with a business, hiring an agency, discussions with investors etc.
- Start date - The date that this NDA will become effective(valid) from.
- Who is entering the NDA? - To whom will you be sending this NDA? Will it be to an employee, a Freelancer or another business? This is what you should add here. In this case, it is Tom Cruise.
- Information about the receiving party - Details like the name of the employee, information that will verify their identity, their role in this agreement, and their responsibilities on a basic level (more on this will be covered later on this process)
- Add any extra information - This can be any important details to note that maybe different to this agreement.
Adding the Initial information to start preparing a Non-Disclosure agreement
Let's start answering the necessary questions.
Introduction and Purpose - What is the purpose of this agreement?
This should clearly say the purpose of the agreement.
Is it to prevent the trade secrets of the business by the employee? It should make sure that the employee does not share the trade secrets or any confidential information to others.
Adding the introduction and purpose of the NDA
Here we add Protection of trade secrets, Ensuring Confidentiality and Preventing Unauthorised disclosures.
This was auto-suggested by Airstrip AI as it has an understanding about our business and knows the best practices to add in an NDA when hiring an employee in this scenario.
It also gives us a good example for this answer, that we can use or use as reference to add our own answer.
Auto suggestions from Airstrip AI
We will be using suggestions for most of the answers, because an NDA is mostly about the best practices for confidentiality and Airstrip AI has the understanding about our business recommends what’s best for this particular scenario.
Definition of confidential information - What is the ‘confidential information’ in the NDA?
The NDA should clearly define what is considered as confidential information in the business.
- Is it the secrets about product design?
- Is it the code involved in developing the product?
- or Is it The research and the materials involved?
The NDA should be as to detail as possible about what is the confidential information involved in the NDA.
Adding the definition of confidential information
Here, Airstrip AI has given personalised suggestions for hiring this cloud developer.
It even covers the very edge cases like, the optimisation techniques that the cloud developer may implement, should be held private and is considered as confidential.
It understands that we are hiring a cloud developer and gives suggestions specific to that, and ways to provide the maximum detailed confidential information involved in this case.
Make sure to be as much detailed as possible when adding this, as this clearly defines what is the confidential information that should not be shared.
Receiving Party's Obligations - What can either business do with the Confidential information?
This should include what the business involved can and cannot do with the confidential information that is shared.
- About not disclosing the information - under what terms the information can and cannot be shared,
- Receiving party cannot use it for their personal benefit (or sharing it with competitors as discussed above)
- And how the information will be safe-guarded.
Adding receiving party’s obligations to the NDA
This should include as much information on
- At what points the confidential information can be shared?
- How the confidential information should be used?
- How the information should be protected and the safety measures that must be taken?
- Not sharing information with others, using it for personal gain, sharing it with competitors etc.
This is to, at maximum, protect the information and clearly define the purpose of the information being shared.
Authorized Disclosures - When can the confidential information be shared?
Authorized disclosure in a Non-Disclosure Agreement (NDA) means that there are certain situations where it's okay to share the secret information protected by the NDA.
These situations should be clearly defined in the agreement, and they usually include things like when the law requires you to share the secret or when the owner of the secret gives you permission to share it.
Adding Authorised disclosures in the NDA
Here I have added that Tom cruise can share the confidential information, when is asked legally to do so, in places like a court, if it becomes public knowledge or if he has the written permission from the company to allow him to share the information.
Duration and Termination - How long does the Non-Disclosure agreement last?
This must be the end date of the agreement. Some questions you can think about to answer this question:
- Is the NDA effective until a specific fixed period (1 year, 2 years) or
- Until a specific project is done or a specific milestone is reached (a design is handed-over to the business or when certain payment milestones are reached).
This is what will define until what time the NDA will stay effective.
It also should include under what circumstances the NDA can be terminated.
This can include that the:
- The NDA is automatically terminated when the project is done
- If both the businesses should talk and come to a conclusion that they want to terminate the contract
- Or if any one business can terminate anytime they want to
For this I am not sure what option to select for this specific employee, so I can click on Get help from Airstrip AI and ask Airstrip AI to help me select the best option, and this is what it recommended:
Asking help from Airstrip AI when answering Duration and Termination in the NDA
It recommended me (the business) to select a Fixed Term agreement, as this outlines a clear timeline that is both good for the company as well as the employee and it also clearly defines the terms of terminating the agreement.
So I went ahead and selected that.
Choosing the auto-suggestion by Airstrip AI for the Duration and Termination of the NDA
Remedies for Breach - What will happen if the NDA is breached?
More on this below. This should include what country/state laws should apply and in what jurisdiction (State of California, Delaware) will handle the dispute that is caused by breaching this NDA.
This could be the state where you have registered your business or any other states that you have decided on, which should be applied to this NDA.
It is important to have it added in advance in case of any disputes, what laws apply will be very important in handling the dispute case.
I asked Airstrip AI to help me select the best option and it suggested a combination of options for maximum benefit to the company.
Adding remedies of the breach for the NDA
Governing Law and Jurisdiction - What law will apply when this is taken to legal action?
Think of it as the rulebook for your agreement. In an NDA, the governing law is like the instruction manual that tells everyone which set of rules to follow if there's a dispute or problem related to the NDA.
For example, if you and another person or company are in different states or countries, the governing law in the NDA clarifies which state's or country's laws should be used to solve any issues.
It's important because it ensures that everyone is on the same page about the rules that will be applied if there's a disagreement or breach of the NDA.
This helps make things fair and clear for everyone involved.
Adding the governing law and jurisdiction to the NDA
Here, as I have already added that the business operates from California when signing up to Airstrip AI, it has automatically suggested as default, that it applies the laws of the state of California which is what I added.
Scope of confidentiality - What type of information should be kept confidential?
There is a difference between Scope of confidentiality and What is confidential information.
Scope of confidentiality
This defines the boundaries or limits of what is covered by the NDA. It outlines the types of information or categories of data that the parties agree to keep confidential.
The scope of confidentiality helps determine what should be protected under the NDA and what shouldn't.
This refers to the specific details or data that fall within the scope of confidentiality.
It's the actual content or secrets that the parties want to keep private. This could include things like trade secrets, financial records, customer lists, proprietary technology, product designs, and any other information outlined in the NDA as confidential.
Adding scope of confidentiality in the NDA
Here I have added that:
- Technical information like the details of the code,
- Financial information like revenue and expenses,
- And Business information like the strategies marketing plans,
— has to be kept confidential.
Do add more information, if required in your scenario, it can be marketing materials, graphics etc. In this case, as Tom is a engineer, we are not adding marketing related information which he won’t be able to have access to.
Exclusions from Confidential Information - What is not considered confidential information?
This should specify the certain types of information that are not considered confidential and, therefore, are not covered by the agreement.
There are some common exclusions for information that:
- Is already public: If the information is already known to the public, it cannot be considered as confidential information as it’s no longer a secret.
- Prior knowledge: If the receiving party already has knowledge about the confidential information before entering the NDA, as long as it can proven it written records, it can not be considered confidential.
- Independently developed information: If the employee has information that he independently developed without using any of the information that was included in the NDA as confidential, then it cannot be considered confidential.
Adding the exclusions from confidential information to the NDA
In this case, I have added all three answers.
Non-Compete and Non-Solicitation - This is What the receiving party cannot do after leaving the agreement
This restricts one party, usually an employee or a business partner, from engaging in a competing business or profession for a specific period of time and within a defined geographical area after the contract ends or the employment relationship terminates.
For example, if you work for a tech company and sign a non-compete agreement, it might prevent you from starting or working for a rival tech company for a year within a 50-mile radius of your current workplace.
The purpose is to protect the interests of the employer or the business by preventing the individual from using knowledge or relationships gained during the employment or partnership to directly compete against them.
For instance, if you leave a law firm and have a non-solicitation clause in your contract, it might prevent you from encouraging your former clients to switch to a different law firm for a specified time, usually within a specific geographical region.
The goal is to protect the company's relationships and prevent individuals from taking valuable clients or talent away with them when they leave.
Adding the Non-compete and Non-solicitation to the NDA
In this case, I have added that
- The employee cannot work for competing company for the next two years after his employment ends,
- He cannot use the business’s clients or contacts for his benefit or for the benefit of any other company until his employment ends.
- That he also cannot recruit or make the employees of the business to leave the company for a period of two years after his employment ends.
This makes sure that it is clearly defined that Tom, cannot be in any way be harm to the company with the access to the confidential information that he has been shared after his employment ends.
Intellectual Property Rights - Who owns the rights to the receiving party’s work in the company?
This should clearly outline who owns the rights (Intellectual property) of the work and information developed by the receiving party.
In this case, as an employee, most companies want to have access to any knowledge or information that is created by that employee including code, designs, techniques etc.
Some of the common ownership types include:
- Company ownership: This says that the company has the rights to the work created by the receiving party.
- Joint ownership: This means that the company and receiving party will both own the rights to the work created through the agreement.
- Receiving party ownership (In this case - Employee ownership): This says that the employee or the receiving party owns the rights to the work that he creates in the company.
Adding the Intellectual property rights
In this case, I have added that the company owns all the rights to the intellectual property developed by Tom who is the employee.
Quick note: Get Help from Airstrip AI at any point
If you have any questions or concerns in the middle of the process, click on Get help from Airstrip AI and clear your questions to make sure you have a clear answer to create the NDA accurately to your scenario.
You can ask it questions as you would to a lawyer and it will guide you through the process to help you create an accurate document.
Get help from Airstrip AI if you have any questions when creating the document
Confidentiality of Agreement - The existence of the NDA itself should be kept confidential
This should clearly state whether the fact that there is NDA involved should be kept a secret.
There are some reasons this would be important:
- Double protection: This means that there is added protection to the NDA. This can be thought of like a lock to a box that is already locked, providing double protection to the NDA.
There are some options here:
- Either the receiving party can share the information in limited times like in a court when he is legally supposed to share it
- Or that the receiving party is completely not allowed to talk about the existence of the NDA.
Adding confidentiality of agreement in the NDA
In this case, I have added that the employee is not allowed to existence and the terms of the NDA under any circumstances providing double protection to the NDA.
Indemnification for Breach - What will the business get in return for the liability when the NDA is breached?
This should clearly define what financial compensation the business would get in case the receiving party breaches the NDA or what sort of liability does the receiving party have if the NDA is breached.
This explains the specifics of what the conpamny get's in return, in case the NDA is breached.
Adding the Indemnification for Breach in the NDA
In this case, I have added that if the NDA is breached, the employee is liable to paying compensation to the company as well as the legal fees involved in the case in the courts in order for maximum protection and prevention of breach.
Final step: Notice and Communication Procedures - How can the receiving party communicate any issues or concerns with the NDA?
This part of an NDA should outline how the parties involved should communicate with each other regarding the agreement. It's like setting up a clear system for sharing important messages related to the NDA.
This is fairly straight forward, most of the times it can be email or in person meetings.
Adding Notice and Communication Procedures in the NDA
In this case, I have added that issues or concerns in the NDA should be communicated through email or through in-person meetings.
The document is done — You now have a Personalised Lawyer-level NDA! ⭐️
The document has started being created, it will analyse all your answers, analyse it together with your business information, add all edge cases, and while that is being created, you can continue reading.
Down below, you will get the NDA that was created now through this process, in a template format for free, if you want it to refer or use in the future, but we highly recommend getting a custom made document.
What if the rules in NDA are breached?
When an NDA is breached, it means that one of the parties (either business or an individual) had violated the terms of the terms and conditions outlined in the agreement.
Either they have shared the confidential information to others without permission or have used the information in a way that is not friendly with the terms mentioned in the agreement.
There are various actions that the business can take (and could happen) in this case:
- Most obvious one, is Legal action: the party that is affected, can take legal action against the other party, seeking either compensation for the damages they caused, or any other applicable option under that law.
- Compensation: As mentioned, the affected party can require a compensation for the damage they caused, in terms of financial loss or reputation or disclosing to competitors.
- Injunctive relief: This is court order to the receiving party who breached the NDA to stop using your confidential information further and prevents further harm.
- Responsible for legal costs: The party who breached the NDA can be responsible for the legal costs involved like the court expenses, lawyer fees etc.
- Reputation damage to the breached party: As the party has breached the NDA to share confidential information, it can lead to losing trust and future business opportunities with this business. Other businesses will not want to work with a business that has a history of violating confidential agreements.
Therefore, you can use the Remedies of Breach question to make sure that the receiving party is not motivated to breach the NDA due to the costs incurred or loss of shared work that they did in the partnership.
Using legal templates vs Custom documents
- Lack of Specificity: Legal templates are generic and may not address the specific needs or nuances of your situation. They are one-size-fits-all and may not cover all the unique aspects of your agreement.
- Potential Legal Gaps: Templates may not include all necessary legal provisions or may contain outdated language. This can lead to legal gaps or issues that could arise later.
- Limited Flexibility: Templates offer limited flexibility for tailoring the document to your exact requirements. You may need to compromise on certain terms or provisions.
- Risk of Incompleteness: Using a template without legal expertise may result in an incomplete or inaccurate document, potentially leaving you vulnerable to legal disputes.
Whereas with getting a custom document made with Airstrip AI :
- Airstrip AI has good understanding about your business: Once you enter in information about your business and where you operate from, it analyses your business with other businesses in your industry, bases it where you operate, what legal things should be marked as important, and suits each suggestion based on these metrics to your business.
Document is tailored to your needs: You get auto-suggestions from AI for each question and what it thinks would suit this case well for your business and what edge cases there are.
For example, for hiring a cloud developer, it, based on our business and the type of developer we are hiring, automatically suggested that even the optimisation techniques that the employee uses to handle the cloud part of the development should be part of the confidential information in the agreement.
Whereas with a template, it just provides a common use case as a confidential information rather it being a custom use case for the NDA that you want to prepare.
Benefits on a Non-Disclosure Agreement
1. Protection of Confidential Information
An NDA ensures that any confidential information shared between parties remains protected. It prevents the unauthorised disclosure, use, or exploitation of sensitive data, trade secrets, or proprietary information.
2. Preservation of Competitive Advantage
By keeping confidential information under wraps, an NDA helps businesses maintain their competitive edge. It prevents competitors or unauthorised individuals from gaining access to valuable knowledge, strategies, or innovations that could be used to replicate or undermine their advantage in the market.
3. Secure Business Relationships
An NDA fosters trust and confidence between parties involved in a business relationship. It provides assurance that sensitive information will be handled with utmost care and confidentiality, promoting a stronger bond and a more collaborative environment.
4. Legal Recourse and Protection
In case of a breach of the NDA, the injured party can seek legal remedies and damages. Having an NDA in place provides a legal framework to protect the disclosing party's rights and interests, ensuring that they have recourse if their confidential information is misused or disclosed without authorisation.
5. Clear Boundaries and Expectations:
An NDA clearly defines what constitutes confidential information and establishes the boundaries of what can and cannot be disclosed. This clarity helps to manage expectations and avoids misunderstandings between parties, ensuring that everyone involved understands their obligations and responsibilities regarding the handling of confidential information.
Final Non-Disclosure Agreement Created by Airstrip AI
This is the Personalised and Lawyer-level document that was created through this simple process.
Get this document as a Free template here:Get the NDA template for Free
If you want to make any changes to the NDA, you can simply add it in plain text in the sidebar, for example ‘The employee should also not share information about product designs and research and development information’ which will automatically change the document accurately to fit that new revision.
This changed document will also be saved as a new version of this document, so your previous changes are also available if you want to access it again.
This document is securely stored in Airstrip AI, and you can manage your other legal documents securely through Airstrip AI as well.
Using Airstrip AI to get your legal documents
If you want to get Personalised and Lawyer-level legal documents and automatic revisions to documents with just plain text input, use Airstrip AI.
We have a Free Plan where you can create one Personalised and Lawyer-level legal document and also get legal assistance from Airstrip AI.
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If you have any questions with how it works, you can try the free plan. Or if you need help with setting up Airstrip, you can send us an email to email@example.com and we can help you getting started.
Non-Disclosure Agreement (NDA) serves as a essential tool in safeguarding sensitive information and fostering trust in various business interactions.
This beginner's guide has explained about the key aspects of NDAs, making them more accessible and understandable for people who are new to drafting legal documents like NDAs.
Whether you're an entrepreneur, a startup founder, or anyone involved in business relationships where confidentiality matters, this guide equips you with foundational knowledge to navigate Non-Disclosure Agreements confidently.
If you need personalised lawyer-level legal documents and automatic revisions to documents with just plain text and more to save you time and money spent on contracts and revisions, start using Airstrip AI.Create a Non-Disclosure Agreement from Airstrip AI — for freeGet the FREE NDA Template Created in this Blog
Have a nice day!