What Is a Disclosure and Non-Disclosure Agreement?
A Disclosure and Non-Disclosure Agreement—also known as a non-disclosure agreement (NDA) or confidential disclosure agreement (CDA)—is a binding legal contract between multiple parties that governs how confidential and proprietary information is shared, used and protected. It makes sure that confidential information—including trade secrets, business strategies, customer lists, and financial information—remains private and is not subject to public disclosure or being misused.
These confidentiality agreements are important for a potential business relationship, starting a new role or protecting intellectual property during negotiations, partnerships or product development.
Why Are Non-Disclosure Agreements Important in Business?
A non-disclosure agreement is an important factor when maintaining trust and protecting the confidential information of a company. These agreements:
- Protect information that is sensitive
- Protect intellectual property and protected data
- Keep a competitive edge
- Define the boundaries of a confidential relationship
- Prevent further disclosures or leaks of private information
- Are regularly used alongside employment contracts, settlement agreements or disclosure agreements
Without a properly drafted NDA agreement, there’s a big risk that that information can be used to damage your business or erode your competitive advantage.
Key Terms in a Disclosure and Non-Disclosure Agreement
To make sure the agreement properly protects information that is confidential, it must include:
1. Confidential Information
Clearly defining confidential information is important. This includes:
- Business plans
- Customer lists
- Financial information
- Intellectual property
- Trade secrets
- Confidential material
- Such information disclosed in the course of a business relationship
Ambiguity increases the risk of lawsuits so this section must be super specific.
2. Purpose of Disclosure
The NDA must state why the disclosing party is sharing confidential info—an example would be to explore a joint venture, review an investment opportunity or evaluate a new hire.
3. Obligations of the Receiving Party
The receiving party will:
- Keep confidential information secure
- Avoid unauthorised disclosure
- Not misuse classified business data
- Keep information protected so only relevant individuals have access
- Honour their legal obligation to the confidentiality agreement
This creates a confidential relationship between all parties involved.
4. Duration of Confidentiality
Non-disclosure can be for a set time (e.g. 2-5 years) or indefinite period, depending on what the parties agree. The NDA should also state what happens when the information covered becomes public.
5. Exclusions from Confidentiality
Some confidential info is excluded from protection—for example:
- Info already known to the other party
- Info already in the public domain
- Public interest, illegal activity or harassment cases
- Legally required disclosures or protected disclosures
6. Return or Destruction of Information
Once the business relationship ends the receiving party must destroy return their confidential material. This keeps info safe and makes sure that there is still NDA compliance.
7. Legal Remedies for Breach
If the NDA is breached the disclosing party can:
- Seek injunctive relief through the courts
- Claim damages for lost revenue or misuse
- Enforce the terms of the agreement
- Demand compliance under a settlement agreement
- Initiate legal action within the stated exclusive jurisdiction
Types of Non-Disclosure Agreements
There are different types of NDAs depending on the type of disclosure and number of parties involved:
- Unilateral NDA – One party discloses confidential information
- Mutual NDA – Both parties show restricted material, often in joint ventures or growth opportunity discussions
- Multilateral NDA – Three or more parties share information
Every type must reflect the regulatory risks, level of trust and scope of the business relationship.
When Should You Use a Non-Disclosure Agreement?
NDAs are useful in many commercial situations:
- When you hire staff for an employment contract
- Talking to potential investors
- Sharing business strategies with collaborators or consultants
- Discussing a joint venture or settlement agreement
- Launching a new role or internal project
- Protecting customer lists and valuable information
In short, use an NDA anytime you need to protect information shared with another party, and where information confidential to your organisation must remain private.
Enforceability of NDAs in the UK
In the UK, NDAs are legally enforceable provided they are:
- Reasonable in scope and duration
- Balanced between the parties
- Not designed to prevent protected disclosure or reporting of illegal activity
A good NDA sets out the consequences for breaching the fiduciary duty or misusing sensitive business information.
FAQs: Disclosure and Non-Disclosure Agreements
Q: What’s the difference between a disclosure and non-disclosure agreement?
A: A disclosure agreement outlines the type of sensitive material to be shared. A non-disclosure agreement restricts how the receiving party can use that information. These are often merged into one confidentiality agreement to define and protect sensitive information.
Q: Are NDAs legally binding in the UK?
A: Yes, if they meet the requirements of a legal agreement and don’t conflict with societal interest or protected disclosure obligations.
Q: Can NDAs be used in employment?
A: Absolutely. NDAs are often used in contracts of employment to protect company’s confidential information. This includes preventing employees from sharing client lists, confidential operational data, or protected data when moving to a new job.
Q: Can an NDA prevent whistleblowing?
A: No. UK law prohibits NDAs from being used to cover up harassment, fraud or other illegal activity.
Q: What if the NDA is breached?
A: The disclosing party can seek injunctive relief, recover damages or pursue civil action through the courts with sole jurisdiction often stated in the contract.
Conclusion
A disclosure and non-disclosure agreement is a must have for any business or individual looking to reduce legal risks, protect classified information and intellectual property.
From safeguarding business advantage to maintaining information confidentiality in employment contracts or business partnerships, NDAs create a confidential relationship backed by legal enforceability.
Whether you’re using a customised agreement or working from NDA templates, always consult legal counsel to ensure the document suits your needs especially when disclosing information in high stakes corporate relationships.
