7 Things to Consider Before Signing an NDA

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Stewart Dunlop working with LegalZoom provides some advice on what to consider when asked to sign an NDA agreement in this latest Guest Blog article.

If you interview for a job, work as a contractor or consultant or are exploring a joint venture, you may be asked to sign an NDA.

An NDA (or Nondisclosure Agreement) is a written document that restricts you from disclosing information that a company considers confidential.

Sometimes the company will ask you sign before telling you anything about the job or project.

What You Need to Know About NDAs

The first thing to know about NDAs is that they’re not a sign of distrust – using an NDA is a normal and routine part of doing business.

But that doesn’t mean it’s ok to sign an NDA without reading it.

If you do, you could be agreeing to obligations that you won’t be able to keep – and the consequences of violating an NDA can be harsh.

Most NDAs follow a fairly standard format.

Here are seven things to look for and consider.

1) What is ‘Confidential’?

The point of an NDA is to protect information that a company doesn’t want to be made public or leaked to competitors.

This can include things like financial information, upcoming products, potential patents, customer lists and marketing plans.

This information is known as ‘confidential information’ and the NDA should explain what the term includes.

Beware of NDAs that are overly broad and require you to keep ‘all information’ or ‘all documents’ confidential.

The agreement should explain what is not confidential, including publicly available information that you’ve got from another source.

2) How Broad is the NDA?

The NDA shouldn’t seem unfair or unreasonable, therefore, think about these things:

• If you and the company are sharing information with each other, the agreement should be mutual, requiring both sides to keep the information private (or you should have the other company sign your NDA).

• The agreement should explain how you can use or disclose the information. It shouldn’t be so restrictive that you can’t even do your job or evaluate an investment opportunity. For example, you may need to show financial information to an accountant or discuss confidential information with other people as part of your job. Make sure the agreement covers these kind of situations.

Above all else, the NDA should be workable for everyone involved.

3) Will the NDA Restrict You in the Future?

There should be a time limit as to how long you’re expected to keep the information confidential.

Think about whether the NDA will cause issues for you later on.

For example, you may want to ask if you can include this engagement on your CV, website or social media.

4) What Are You Supposed to Do with the Confidential Information at the End?

NDAs commonly say what you should do with the confidential information when the engagement, project or relationship is finished.

You may be required to destroy documents or return them to the company, so make sure you’ll be able to comply.

5) What Happens If You Violate the Agreement?

Most NDAs say that the party providing confidential information is entitled to injunctive relief in the event of a breach.

This means that the company can get a court order preventing you from disclosing confidential information – some agreements can also make you responsible for legal fees.

Watch out for agreements with overly harsh penalties.

These include liquidated damages (an agreement to pay a set amount in the event of a breach) or an obligation to pay for breaches by third parties that you don’t control.

6) What Else is Included in the NDA?

A true NDA just covers confidential information, but sometimes the NDA is part of a larger agreement that includes things like noncompete clauses or assignments of intellectual property rights.

If you are concerned about the overall scope of the agreement, you may want to have attorney or a lawyer look over it before you sign.

7) Should You Ask Questions or Negotiate?

NDAs are often written from a form and that means things can slip in that don’t make sense or apply to your situation.

Don’t be afraid to ask questions – doing so can help you get an NDA that works better for both sides.

If the NDA seems unfair or overly restrictive, you can try to negotiate better terms or additional money to compensate you for the restrictions.

Smaller companies may be receptive to negotiation whilst large corporations are more likely to be inflexible about their NDAs, but that doesn’t mean you can’t ask.

Sometimes an NDA is thrown at you, say at a job interview, with no time to consider the impact.

Do take the time to read it and ask questions – even if you feel you have little choice and no bargaining power, it still pays to know what you’re signing.

This article has been provided by Stewart Dunlop – Content Marketer working with LegalZoom

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Sam Rose

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