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Why Do You Need a Non-Disclosure Agreement?

Non-Disclosure Agreements ("NDAs"), also referred to as Confidentiality Agreements, are one of the most common legal documents, and we hear about them frequently. But what do they actually do, and why do you need one? 


So, What is an NDA? 

Simply put, an NDA is a legally binding contract wherein one party agrees to disclose confidential information to a second party; in turn, the other party agrees to not share this information. This creates a confidential relationship between the two parties, to the exclusion of all outsiders.

NDAs are customary practice for businesses and investors who are entering into negotiations with other parties. It allows them to share sensitive information without fear that this information will end up in the hands of competitors.


Why Do They Matter?

Business owners and investors are ultimately committed to the profitability of their business ventures. Having valuable information leaked has the potential to undermine these investments, so it is critical to seek out an airtight NDA. 

Because the NDA is a binding legal contract, it will be invaluable if one of the parties breaches it: anybody who infringes upon it will be legally obligated to pay damages to the other party.


Are They All the Same?

All NDAs are the same in that they all constitute an important legal framework. However, the content and context in which NDAs are used can vary – they may be used between employers and employees, or by businesses wishing to enter negotiations.

For example, an employer and an employee at a company may sign an NDA because the company is working on projects that they do not want to be made public, or the company is seeking venture capital from potential backers. So, while the context may vary, all NDAs are legally binding contracts that precisely identify what information is considered to be confidential.


What Would Happen if I Did Not Use One?

Without an NDA, individuals would have no legal recourse if confidential information were leaked. They would be left with a damaged reputation and no legal avenue to pursue damages.


Key Points to Remember

  • An NDA is a legal recognition of a confidential relationship between two or more parties and protects the information that they share from outsiders. 

  • A party who is found to have violated the terms of an NDA will be liable to a breach of contract and will be obligated to pay damages.

  • The NDA is of vital importance for businesses and employers.

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