Non-Disclosure Agreement

Helpful tips when creating a Non-Disclosure Agreement on Ownr

Shane Murphy avatar
Written by Shane Murphy
Updated over a week ago

Mutual or One Way

Your first decision when making an NDA is to decide who will be bound by the terms to protect confidential information. In many business relationships, only one party is providing confidential information to the other (and they would use a "One-Way" NDA). In other cases, both parties are disclosing confidential information to each other (and they would use a Mutual NDA).

Example of a "One-Way" NDA

If a company is looking to raise capital, the company will likely disclose its financial records, its intellectual property, its business strategy, and other sensitive information to potential investors. It would be common for the company to want all potential investors to sign an NDA before receiving this information. At the same time, the investors are not disclosing any confidential information to the company. The investors won't usually disclose their financial performance or details of their other investment deals. In this case, the disclosure of confidential information is "one-way" so only the investors would need to enter an NDA confirming they won't disclose any of the company's confidential information.

Example of a Mutual NDA

When two companies are considering a partnership or joint-venture, they will want to do extensive due diligence on the other company. They will want to fully understand the other's financial performance, its compensation structure, and its business strategy. Since both companies are disclosing and receiving confidential information, they will enter a Mutual NDA. With a Mutual NDA, both parties are agreeing to protect the confidential information of the other party and not disclose it without permission.

Since business relationships can evolve quickly, many companies will only enter into Mutual NDA agreements. Even if the disclosure of confidential information appears to be "one-way" at the start of the relationship, the parties may request information from each other over time. A Mutual NDA provides increased protection and can be used even if there is no current plan for one of the parties to disclose confidential information. 

Time Limit

An NDA needs to be fair and reasonable to both parties. A time limit helps establish that the parties have reasonable expectations and are not attempting to take advantage of the other.

Most commercial agreements have some sort of time limit or expiry date. This prevents companies from binding themselves to perpetual agreements when they know circumstances and expectations can change over time. 

It's fairly common for NDAs to have some expiry date to ensure the agreement appears reasonable. After the expiry date, the parties would not be required to keep the other side's confidential information secret.

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