Mutual non-disclosure agreements are used when 2 people or entities want to share confidential, secret, or proprietary information solely with one another. Mutual non-disclosure agreements, or NDAs, require the signature of both parties to be legally valid, and only take a few minutes to complete once the terms and obligations are understood and agreed upon.
Some organizations may refer to a mutual non-disclosure agreement as an NDA or confidentiality agreement.
Who should use this form?
Unlike a disclosing, or unilateral non-disclosure agreement, which is usually initiated by the only party in the relationship with confidential information, a mutual non-disclosure agreement can be initiated by either of the 2 entities or people entering into a relationship.
For example, an engineer with a new invention wants to hire a firm with a classified list of marketing contacts to promote it. In this case, both of the parties have an interest in protecting their confidential information, so either of them may request an NDA.
What to include in a mutual non-disclosure agreement
Mutual non-disclosure agreements may cover many legal issues relating to the exchange of confidential information, but most will include these 4 elements at a minimum:
- What defines confidential information for the purposes of the agreement. This may include specific information (programming code) or categories of information (customer financial data).
- What is excluded from the agreement. This usually refers to publicly available information or most important information that was created or discovered outside of the time the agreement was in force.
- The obligations of both parties. Usually this simply means that neither party will disclose confidential information, nor encourage a 3rd party to acquire it improperly.
- The term of the agreement. 5 years is most common in the United States, but parties may negotiate the term.
The agreement may also include other boilerplate provisions, such as:
- Which state laws will apply in the event of a breach.
- Whether arbitration will be required in case of a dispute.
- Who will pay attorney's fees for the prevailing party if a case is brought to court or arbitration.
If you are asked to sign a mutual non-disclosure agreement, closely review the document with an attorney. Once you execute this agreement, your options for legal recourse in the event of a breach are limited by the terms contained within it.
Once the document is signed by both parties, it is considered legally in force; you do not need to file the document with a government agency. Be sure to securely store a copy of any NDA you sign, and if you do not clearly understand the obligations in the agreement, review it with your lawyer.