Table of Contents
As a business owner, you must safeguard your company’s confidential information. Mutual and unilateral non-disclosure agreements (NDA) allow you to do so. These legally binding documents prevent others from leaking your company’s valuable information. This article will explore the two main types of NDAs (mutual and unilateral) so you are aware of which best suits your commercial interests.
What is a Non-Disclosure Agreement?
An NDA is a contract that restricts another party so they cannot disclose your confidential information to others. The document will usually detail any limited scenarios in which they can disclose information.
Most NDAs will detail:
- which data your company classes as confidential information;
- how and when the other party can use or record protected information;
- when the other party is not allowed to pass on or disclose that sensitive information to others; and
- the right for your company to request the return (or destruction) of the confidential information upon written request.
The document’s range will depend on whether it is a mutual or unilateral NDA.
Unilateral Non-Disclosure Agreements
Unilateral NDAs apply when only one party discloses confidential information to another. For example, suppose you are seeking guidance on making more profit from an external business consultant. You will provide that advisor with detailed financial figures outside the public eye. However, the consultant will not share any confidential information with you.
Because of this, the parties will only be interested in ensuring that the consultant does not spread the documents containing sensitive financial information. Conversely, the consultant will have no issues with individuals in your business knowing their advice, as that is the purpose of providing it.
Continue reading this article below the formCall 0808 196 8584 for urgent assistance.
Otherwise, complete this form and we will contact you within one business day.
Mutual Non-Disclosure Agreement
In contrast, a mutual NDA usually arises when both parties share confidential information. Therefore, it places obligations on you and the other party.
Suppose you run a sports clothing business that specialises in producing a unique, lighter, and more durable material than the competition. Your company wishes to explore a deal with a well-known trainer manufacturer. You all agree that each party may disclose trade secrets to each other. For example, you may disclose information on the unique material, and they may discuss the art of cheaply producing training shoes. Thus, a mutual NDA will ensure that the information provided is only discussed internally for the deal.
Breaching the NDA
The repercussions of breaching an NDA will depend on the exact wording of the contract. Ultimately, breaching an NDA will usually result in:
- paying financial damages to your business (either a stated figure within the NDA or an amount determined through negotiation);
- obtaining an injunction in your company’s favour to prevent further leaking of sensitive information; or
- formal legal action against the other party ending in financial settlement or a judicial decision.
Key Takeaways
Ultimately, the best way to protect information is to avoid disclosing it to other parties. However, this can be unavoidable when negotiating commercial agreements and carrying out routine business activities. Therefore, it is advisable to limit information leakage as far as possible by signing a mutual or unilateral NDA.
If you need help with mutual or unilateral non-disclosure agreements, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
Confidential or sensitive information can include data that would harm your company’s interests if it becomes public. This could include the salary of staff members or proprietary information, such as trade secrets.
If the other party refuses to sign an NDA, it may be helpful to obtain legal advice on the pros and cons of disclosing sensitive information to them. This may include an assessment of the other party’s trustworthiness, the risks of them leaking the information and the potential advantages of carrying out business with them.
We appreciate your feedback – your submission has been successfully received.
