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What should you know about non-disclosure agreements?

On Behalf of | Apr 12, 2022 | Business Law

Businesses use non-disclosure agreements (NDAs) to protect valuable proprietary information from others. They are often provided to new hires to ensure they maintain secrecy when it comes to trade secrets and intellectual property. They can also benefit businesses in search of investors, which entails sharing closely-held information.

It is important for businesses and employees to understand the legality of NDAs to ensure the contract is legally binding. Here are a few points to consider if you are in the process of drafting an NDA.

NDAs can benefit both parties

The best NDAs, meaning those that are enforceable, offer benefits to both parties. In the case of the business, the NDA ensures important information does not fall into the wrong hands. For example, if a competitor somehow came across proprietary information, they can use it to turn a profit. When it comes to the employee, the benefit is usually maintaining employment with the company in exchange for their cooperation.

Clauses must be enforceable

Certain conditions can make an NDA unenforceable, which is why contract language must be carefully constructed. If language is too vague it is hard to enforce, and if it is too strict it can harm the worker. Additionally, businesses cannot use NDAs to protect information that is already public knowledge. Finally, an NDA cannot protect illegal information, such as employer misconduct.

Penalties apply to contract violations

In the event you create a valid NDA and the employee violates its terms, certain legal penalties may apply. A breach of contract lawsuit is one possibility, which can result in monetary damages. Violations of intellectual property law can also land the employee in legal trouble, as can cases of copyright infringement.

The best NDAs contain clear, concise language and fair terms. When these elements are present in the document, it will help protect your best interests regarding your business.