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The many uses of an NDA

Business owners and entrepreneurs frequently must share sensitive information about their companies or the way they conduct business with other parties. These parties may include vendors, distributors, suppliers, investors, employees and more.

The use of contracts referred to as confidentiality agreements or nondisclosure agreements may allow companies to confidently share the sensitive information without fear of that information being misused.

Terms in a confidentiality agreement

As explained by Forbes, a nondisclosure agreement should provide a detailed identification of what data or types of information the contract covers. Examples include financial data, sales models, marketing strategies and competitive reviews. Contracts should outline the preferred method of conflict resolution, such as mediation or arbitration, if the two parties at some point engaged in a dispute.

NDAs may stipulate how any shared information should be used or shared with others and which parties are bound by the contract, along with the effective dates of the agreement.

NDAs and employees

Many people today sign confidentiality agreements as part of their employment onboarding with a company. According to Harvard Business Review, the use of NDAs with employees has been controversial in some situations where these contracts may be viewed as preventing employees from exposing illegal or unethical behaviors.

Another issue raised by many is the potential limitation on a person’s future employment that may result from signing an NDA with an employer. The access to intellectual property or knowledge may be an essential part of a job function and unrelated to one specific company yet may appear to fall under the provisions of a confidentiality agreement.