What is a Non Disclosure Agreement?

working on a non disclosure agreement

What is a Non Disclosure Agreement?

A Non Disclosure Agreement (NDA) is a really important legally binding contract between two or more parties. Its purpose is to prevent the disclosure of certain confidential information further than those parties. They can be one way (i.e. impose an obligation on one party alone) or two-way (both parties have certain obligations).

Before disclosing any confidential information, a NDA is highly recommended and in some circumstances required to meet professional regulations. Either that you are obliged to keep confidential in the first place – e.g. client records, customer information, bank and credit card details, etc.

If you have a great new idea and want to be first to market, you would be wise to get anyone that comes in contact with the idea to sign an NDA.


Do you really need an Non Disclosure Agreement?

Every person has an opinion or has heard an opinion on whether an NDA is necessary and I don’t think I’ve heard the right one yet.

The simple answer I think is yes (or at the very least heavily considered and get advice), unless you are comfortable to take the risk. It is highly advisable to have one in most circumstances as a starting point. Then, you can consider on a case-by-case basis whether you insist on each individual you decide to disclose.

Needing to tell the world Vs needing to be first to market

Yes, everyone has ideas (most entrepreneurs will have multiple ideas in a given day). In reality it’s the implementation that is more important than the actual idea.

In fact, in some instances, you may want the whole world to hear about your new idea. So you want people you tell to tell as many people as possible to gain market traction or attract the right people to your business. Including a potential investor.

But if you have a very good idea that hasn’t been done in the market yet and you want to be first to market, you would be wise to get anyone that comes in contact with the idea to sign an NDA.

Weighing up the potential of the person you disclose the information to, to then be able with the adequate resources to effectively steal the idea and build it themselves.


What signing a Non Disclosure Agreement means

Signing an NDA means that they can’t go off and steal the idea. They can’t pinch your intellectual property. And they can’t disclose confidential information without breaching the agreement. It would give rise to a claim for damages for breach of contract and other remedies.

It also sends a clear message that this idea is important and confidential and must be kept that way. Just telling someone to keep something in confidence is not enough and can lead to he said / she said.

I know it’s uncomfortable asking someone to sign a document before you tell them your idea. But if you want to protect your Intellectual Property, it’s just got to be done.


Investors will often pull the ‘relationship card’

You will hear investors say: “I don’t need to sign an Non Disclosure Agreement. I speak to hundreds of business owners every year. Don’t you trust me? Relationship is built on trust.” Guilt trip – that old chestnut.

I think you should at least ask them to sign an NDA. Firstly, it demonstrates that you are serious about protecting your IP. It also gives you rights and remedies if they go ahead and steal your idea. Even if it’s just to get someone else to build it.

Most people don’t know the investors they’re pitching at very well if at all. I would be suspicious of any investor that refused to sign an NDA.

Similarly, a web-developer or other contractor who is going to know the way the product/service works in an intimate way, needs to have your complete trust and you need adequate measures in place if they breach it.

It’s just good business.


Request your NDA here.

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