Nondisclosure agreements sometimes called NDAs or confidentiality agreements are contracts intended to protect information considered to be proprietary or confidential. Parties involved in executing an NDA promise not to divulge secret or protected information disclosed during employment or other business transactions. For example, an NDA is appropriate for prohibiting others from disclosing a new design, an idea for a new Web site, or confidential material contained in a copyrighted software program. Should one of the parties to an NDA use protected information without authorization, a court can stop the violator from making any further disclosures and may award monetary damages.
Nondisclosure agreements can protect any type of trade secret or any information not generally known, providing a competitive advantage. However, the use of NDAs is not an end in itself. The purpose of these agreements is to create a confidential relationship between one person who has a trade secret and another to whom the secret is disclosed.
Parties can also establish a confidential relationship informally, either through an oral agreement or through the conduct of the parties. Few people rely on such informal arrangements, however. A one-way agreement is used when only one party is making a disclosure—for example, when a secret is explained to a contractor or investor.
A company may require an employee to sign a nondisclosure agreement or modify an agreement furnished by the employee. Generally, it does not matter who furnishes the nondisclosure agreement, so long as it contains the basic elements limiting disclosure.