- May 27, 2022
- Posted by: Accounting Equation
- Category: Knowlegebase
A Non-disclosure Agreement is a legal contract under which one company wants to make sure that the information it provides to a second company is safeguarded and won’t be shared by the second company with its clients. This way, confidential information does not end up in the hands of competitors.
Non-disclosure agreements are used in many industries such as engineering, biotechnology, and finance. They help safeguard trade secrets and any other type of information that is meant to stay confidential. Traditionally a “non-disclosure agreement” is signed by two parties. Two people who have built up trust and share personal information with one another means that they have a higher chance of abiding by the NDA.
The purpose of an NDA is to legally organize the exchange of personal and sensitive information. For example, if a company has developed a new product, they may provide instructions or drawings to a contractor in order to build the product. The contractor would have to sign an NDA before gaining this information. There are three types of NDAs: Generally speaking, an attorney can help with drafting NDAs so that they adequately protect everyone involved from harm. It is important for people who sign their names on NDAs to understand the nature, scope and potential risks of the assignment before agreeing.
Generally, NDAs are of following types
A unilateral non-disclosure agreement is one in which a party shares confidential information with another party without it being shared back. This type of agreement has two parties involved, where the disclosing part will share his or her confidential information with the other or the receiving party.
A bilateral or mutual non-disclosure agreement is a contract that allows the disclosure of information on both sides. This means that each party can share trade secrets with the other and they both agree to keep it private. Such NDAs are more commonly used when there are contracts involved between two companies.
A multilateral NDA is a type of non-disclosure agreement where three or more parties are involved. Here, one party discloses the information, and the remaining parties are required to protect it from further disclosure. Such a type of NDA is often used in business transactions where one company needs to disclose confidential information about its prospective buyer to another company.
Further, in the case of the service industry, it’s better to execute an NDS and other agreements. Whenever a service provider engages with the service recipient, he runs this agreement so that the recipient will be held liable for any faults or defects on their end. This will keep him from having to pay for any damages.