Top Four Reasons To Send an NDA

When contracting with others, you may need to disclose valuable commercial information to achieve the best results. To do this more efficiently and safely, you should consider sending a Non-Disclosure Agreement (or “NDA”) to the other party. An NDA is a legally binding agreement between two or more parties that ensures certain information will remain confidential. NDAs prevent others from disclosing that information to unauthorized parties. If confidential information is shared, a person may be held legally liable for breaching the NDA. In this article, I will discuss “The Top Four Reasons To Send an NDA“.

1) NDAs Protect Valuable Information

The image of the security guard emphasizes how an NDA protects your ideas.

As a business owner, you obviously want to protect confidential information that is commercially valuable. This information could be customer lists, commercial agreements, vendor lists, inventions, trade secrets, provisional patent applications, pricing information, or even strategic plans for the future. Disclosing confidential information could put your business at risk of losing customers or even empower your competitors. An NDA helps ensure that “what happens in your business, stays in your business” even if it’s not as fun as partying in Las Vegas.

2) Information Sharing = Better Outcomes

While protecting confidential information is critical, sharing that information with another party could benefit the business. Let’s take the example of Dr. Rouse. One night while playing piano after a trauma case, Dr. Rouse is struck with inspiration for a new idea. He wants to build a web app that efficiently schedules patients at Princeton-Marlboro Teaching Hospital. There is only one problem, he has no clue how to develop a web app. He retains one of New Jersey’s best web development firms to build his app, but knows that the project must align with the hospital’s confidential expansion plans (HIPAA-related issues aside). While the firm could build the app prototype without the plans, Rouse believes sharing that information could lead to a more successful integration. By putting an NDA in place, Rouse can use the firm to build an app that syncs with the hospital’s vision for the future.

3) NDAs Signal Seriousness

Sending an NDA is an indication that you take your business seriously. Remember, an NDA is a legally binding agreement that carries serious consequences if breached. By signing the agreement, the other party is put on notice that you’re prepared to take action if they don’t protect your information. Now you might tell yourself, “NDAs signal that I don’t trust people” or “I’ve known this person for years, they’d never tell anyone”. These are potential outcomes, but as the business owner you have an obligation to protect and grow your company. If someone isn’t willing to sign an NDA, you should think twice about disclosing confidential information or even working with them at all.

4) NDAs May Fulfill Duties to Other Stakeholders

This reason seems less obvious, but sending an NDA to a third party may be necessary to honor your obligations to other stakeholders. If you operate a business with shareholders, you have a fiduciary obligation to protect their business interest by acting carefully when transacting with others. Your existing agreements with vendors or customers may require that you hold their information in confidence or request permission for disclosures with safeguards in place. The NDA is a useful legal tool in both scenarios to make everyone feel safe and happy. And that’s all we want at the end of the day, right?

Consider Hiring a Lawyer

There you have it, The Top Four Reasons To Send an NDA“. While there are many forms online, it is always best to have a licensed attorney draft an NDA. Not all NDAs are the same and you want one that suits your business needs. Consider using Awen Innovations or another law firm to craft a document that works for you. It’s a jungle out there, so a little planning goes a long way.