NDAs are among the most common contracts in business, and creating them can be a real headache for legal teams. Discover how to create (and automate) NDAs more efficiently in this guide.
According to studies, over a third of the US workforce is bound by a Non Disclosure Agreement. If you haven’t signed one already, the chances are you’ve heard of them. They are an important tool for businesses that want to keep their confidential information private. But what are NDAs, who uses them, and how can you create one?
Use the navigation menu below to find out more, or if you're ready to get started, just dive straight in with our free NDA template, which can be found below.
What is a Non Disclosure Agreement (NDA)?
NDA stands for Non Disclosure Agreement, and the term is used to describe a legal agreement that outlines what information can and cannot be disclosed, and to whom.
Within this type of contract, parties agree on confidential material they’d like to share with each other but prevent from being shared with third parties. In doing so, NDAs offer confidentiality and privacy when it comes to sensitive or proprietary information, like commercial terms, product information, and trade secrets. For this reason, they are often also called confidentiality agreements.
Whilst NDAs have been portrayed unfavorably in recent years, they remain a critical tool for businesses, enabling information to be shared in a safe and confidential way.
In fact, NDAs are amongst the most common business contracts, with applications everywhere from sales and finance to employment and publishing. However, with growing use, creating and reviewing NDAs at scale can quickly become a problem for legal teams at fast-growth businesses, who often report feeling buried in low-value work (read more in our 2021 Tech GC Report).
What's the difference between a Unilateral NDA vs Mutual (bilateral) NDA?
A unilateral Non-Disclosure Agreement is a confidentiality agreement that only binds one side of the contract to protect the other party's confidential material. A mutual Non-Disclosure Agreement is one where both parties agree to be bound to protect each other's confidential material.
Make sure you know which type of NDA you're signing before you put pen to paper (or rather electronic signature - no need for wet signature in 2021).
When should you use a Non Disclosure Agreement?
Great! Now you understand what an NDA is, and why they are important. But when should you actually use one? The most common use cases of NDAs include:
1. Recruiting a new employee
When you hire a new member of staff within your organization, you should accept that these employees will require access to confidential and proprietary information about the business in order to do their job. To ensure that this information remains confidential, employers tend to ask an employee to sign an NDA prior to starting their new job, or taking on a new project.
2. Finding a new business partner
Highly confidential information will often also be shared in the pursuit of a new business partner, in a bid to get them on board. These details can cover everything from privately held data to a new business idea, product or invention. However, to prevent the prospective partner from taking the idea and exploring it themselves, an NDA is used to secure the ideas in some way.
3. Obtaining a new client
When you begin working with a new customer or client, you may be sharing information that you’d prefer to keep confidential with them. This could be anything from details about a new product that you’re trialling or information about your software. If you don’t want the secrets getting out, make sure you secure them.
4. Seeking funding for a business idea
When seeking funding from an investor, you will need to be as transparent as possible about your company’s financial situation, business strategy and product. Therefore, it is essential that you put an NDA in place to protect this information once shared.
5. Working with a service provider
In the course of business, you may be receiving services from a company or consultant who requires access to sensitive information about your business. In many cases, these service providers will also work for plenty more clients just like yourself, so it is crucial that you secure this confidential information with an NDA - particularly if they work with your competitors, too.
What kind of information should be protected by a Non Disclosure Agreement?
The information that your NDA covers will depend entirely on your needs of your business, and how you choose to operate. However, certain categories of information are more likely to need protecting. Here are some common examples of NDA-protected information:
- Customer lists
- Manufacturing processes
- Technical data
- Business strategies and ideas
- Financial records
- Blueprints and technical designs
- Software development plans
Is a Non Disclosure Agreement legally binding?
Non Disclosure Agreements are legal contracts, which means that they are enforceable by law and within courts, so long as they are written and used correctly.
However, confidentiality clauses will not be legally binding if they are used to prevent whistleblowing in the public interest, which often involves telling the authorities about illegal or dangerous practices at work. According to the Law Society, an NDA could also not be legally binding if an individual hasn’t had adequate time to think about it before signing.
It is also worth noting that certain US states take a more generous approach when ruling on NDAs. For example, California is among the US states that appear to value an employee’s mobility over protectionism. This can be seen in cases where Californian courts have struck down confidentiality agreements that are too broad.
With all of this ambiguity surrounding NDAs, it is important to get yours right the first time. Here’s our advice...
How to create a Non Disclosure Agreement
Finding a way to create and process NDAs at scale is important for any fast growth business. Whether you’re experiencing difficulty deciding what your NDA should include or you’re simply unsure where to start, agreeing confidentiality agreements can quickly become a bottleneck that holds your team back. We’re here to help.
Let's explore the manual NDA process from end to end. We’ll discuss how to create an NDA, the challenges you might face and the clauses you can’t afford to forget!
Who creates NDAs?
Due to their ubiquity, NDAs affect numerous teams in various different ways. Different teams and individuals will need to send out NDAs, depending on the use case. These teams will often include sales, legal, HR, finance, operations and procurement. If you have confidential information that you need to protect, you are already a potential user.
However, you may find that legal counsel will often create and own the NDA templates, and they will usually have approval rights too.
What should a Non Disclosure Agreement include?
Creating a strong and comprehensive NDA is key to ensuring that your company’s private information remains protected against exposure. Therefore, it is critical that you include all of the important information and necessary clauses within your NDA.
Not sure what to include? Well, amongst the basic elements of a contract, an NDA will typically include the following provisions:
1. Details of the parties involved
Your NDA should include basic information about the parties involved and the people that the agreement will cover. This should refer specifically to the different groups and individuals involved in the agreement.
2. Definition of confidential information
When drafting your NDAs, you need to set out a clear scope of what information needs to be kept confidential, and a definition of what confidential information means.
This may vary between parties and case uses, but each and every NDA needs to define clearly which materials are deemed confidential, as well as the more specific details such as whether oral conversations, written notes and documents fall within the scope of confidentiality.
On top of this, you should also define what is not confidential, since some details cannot be kept confidential in certain circumstances. It is important to distinguish between what is covered and what is not.
3. Term of confidentiality
As with all contracts, NDAs should clearly define the agreement’s duration. This can either be a clear and measurable duration, such as two years, or it can be indefinite, meaning that there is no set end date for the agreement, and the information should remain confidential indefinitely.
4. Legal obligations to disclose
Whilst NDAs are designed to prevent confidential information from being disclosed, there are a few instances where disclosure is unavoidable. For example, if disclosure is required in the event of legal proceedings or after being demanded by the government, the parties to the contract will have a legal obligation to disclose the information, regardless of the agreement. This is something that should be made clear to all parties within the NDA itself.
An NDA will also usually set out what exclusions to the confidential clause will be. For example, if the information is publicly known, it will be excluded from the NDA. These clauses may also outline who the recipient of the NDA can legally disclose the information without breaching the agreement.
6. Repercussions for breach of confidentiality
Either intentionally or by mistake, breaches of confidentiality can happen. Therefore it is important that your NDA includes details on what happens if the NDA is breached, as well as what remedies will be available to the injured party.
This section will typically address the consequences of a breach of confidentiality, which can differ depending on the situation and grant a right to remedies for the disclosing party.
7. Legal jurisdiction
An NDA should also outline what jurisdiction(s) the legal agreement will be governed under if a breach of confidentiality did occur.
8. Additional clauses
Depending on the situation, some NDAs may require additional clauses on issues like severability and future amendments, all of which should be outlined from the offset.
To see an example of a simple NDA, download our free NDA template.
The manual NDA process
However, even with an exhaustive list of what to include, creating an NDA from scratch can be a tiresome ordeal. In fact, business users hoping to automate their contract workflow frequently complain of how painful the process can be. At its worst, the process looks something like this:
A user in the business emails a member of the legal team and says “I need an NDA.” The legal counsel, likely buried in work, suggests that the user finds it themselves on the shared drive; she might eventually relent and email one across.
Somehow, the user finds a template (not necessarily the most current version), fills in various fields in square brackets and emails it to the legal team to review. Legal corrects various details and returns it to the user.
The user then sends the NDA to the counterparty, who may comment and mark up the contracts in Word, emailing it back. If there are still disagreements over the terms, each party will redline the document and pass it back and forth, typically saving and sharing a new document each time.
Eventually, an agreement is reached and both parties sign, either with a wet signature and a sign/scan/send process or an eSignature provider.
Once signed, the NDA will be emailed to the relevant parties and stakeholders (legal, sales, and so on), and hopefully saved on a shared drive.
Common pain points when creating NDAs
As you have just heard, building NDAs from the ground up is hard work. But why? These are just a few of the various pain points our customers have experienced before automating their contract workflow:
- Low-value work: “I’m the General Counsel, responsible for the company’s legal affairs, and yet I spend significant portions of my time telling business colleagues where they can find a document on a shared drive over and over again”
- Version control risks: “As a salesperson, I never know which the most up-to-date template is - are these the right terms?”
- Incorrect templates: “Do I need the unilateral NDA or a mutual version?”
- Unprofessional: “Our NDAs vary so much and aren’t standardized - as well as being risky, this looks amateurish”
- Wasted time: “Negotiations on these NDAs are getting lost in my emails”
- Lost metadata: “I don’t have visibility post-signature of our NDAs - I’m uncertain as to which of our commercial relationships are governed by confidentiality”
Need help creating an NDA? Want a free template?
Here's an NDA example you can use to get confidentiality agreements in place quickly, as part of an automated workflow that frees up your team for high-value work.
Click below to get this free non disclosure agreement PDF, or as a draft in Juro, or hit the last link to get a free account, where you'll find this free confidentiality template included in your workspace ready for you to use.
Keep reading to get a better understanding of the NDA process, and why more and more high-growth businesses are choosing to automate NDAs.
How to improve your NDA process
Try contract automation for NDAs
Modern, growing businesses are increasingly looking to automate routine contracts like Non Disclosure Agreements. By moving your NDA to a contract automation platform, you can save time, cut out cross-platform hassle and free up the legal team's time for high-value work. With Juro’s automated templates, you can generate simple NDAs in seconds. Here’s how:
1. Create NDA templates
In most businesses, legal counsel will want to retain control over what is included in an NDA, and how they are used. Within an automated workflow, in-house lawyers define and revise the terms of the NDA, and can enable other departments to generate their own contracts from a template without altering the key language of the confidentiality agreement.
2. Create NDAs from templates with self-serve automation
At Juro we see a wide variety of business users self-serving NDAs from templates. Most often, this activity will come from the sales teams, who send NDAs along with MSAs (Master Services Agreement) and order forms to new prospects. HR teams also commonly automate and send NDAs to new employees or contractors; or in the media industry, journalists and editors might send NDAs to ensure exclusivity for a story. Self-serve automation makes all of this easier, and more efficient.
In an automated workflow, parties can use the Q&A flow on an NDA template to enter key data in smartfields, such as the counterparty’s name and email address, the contract’s effective date, and so on. This data will then autopopulate the contract, making the NDA seamless and searchable.
Within your business, it is important to establish who can generate NDAs, and where they can be passed on to other departments. In fact, some companies even use automation to allow an NDA to be generated by a bot, following a specific command in Slack. This kind of approach depends on risk appetite, but will alleviate the huge pressures on your legal team as your business grows.
Automate NDAs with Juro.
3. Approve NDAs in a browser-based workflow
Although NDAs have many applications and are comparatively low-risk, it’s important that legal teams retain control and oversight of terms. NDAs are seldom heavily negotiated, but it can happen, and the decision-makers as to those negotiations still need to be legal personas. By setting up an approval workflow in the contract automation platform, legal teams can make sure they still have the opportunity to review each contract before it goes out.
4. Sign NDAs online
Parties can use secure eSignature to sign Non-Disclosure Agreements online, quickly and safely. The authorized signatories for NDAs won’t vary too much from other kinds of contracts - they could range from sales managers to CEOs depending on the size and structure of the company. Find out more about contract automation.
5. Find one platform that does it all
For too many businesses, getting an NDA over the line means hunting through a shared drive to find an up-to-date template, tracking changes in Word, negotiating over email, signing in DocuSign and then trying to make sense of where to store it. This is frustrating, time-consuming and prone to mistakes. Just find one platform that can handle templating, contract creation, negotiation, signature and management. Your company accounts will thank you, too.
6. Keep track of your NDAs
In the old days, a signed NDA would be locked away in a storage cabinet somewhere, never to be found again. Even with the manual creation of NDAs, lots of tools means lots of files, and lots of files means that your NDAs can be easily lost, or misplaced, resulting in data loss.
A contract collaboration platform that works with contracts as dynamic, digital data models can get rid of this risk, ensuring that every piece of data from your NDA is structured and searchable from day one. You will never have a problem with version control again.
Useful features for managing NDAs
If you choose to automate your NDAs with Juro, here are just a few of the innovative features you can use to improve your NDA workflow for all of the parties involved:
- Self-serve contract generation: by using a Q&A flow to create documents from locked templates, business users can generate legally compliant contracts in seconds, without needing legal input.
- Approval workflows: defined roles for legal approvers are necessary to ensure that NDAs can move quickly between stakeholders.
- Internal commenting: if standard terms are to be varied, it’s useful for internal stakeholders to be able to collaborate in real time on the document, without needing to worry about audit trails and version control.
- External redlining: similarly, although negotiation isn’t common, counterparties need to be able to negotiate the NDA without having to move into Word, losing audit trails and data.
- eSignature: given the volume and velocity of NDAs, particularly in a high-growth business, eSignature is particularly important to make sure the workflow is frictionless.
- Salesforce integration: if sales documentation lives primarily in CRM, then it’s useful for NDAs to be live-synced between the two systems. Sales teams also achieve velocity by creating NDAs directly from Salesforce.
- Companies House integration: the best contract automation solutions allow UK users to use the Companies House API to make sure data, such as a company’s legal name or registered address, is accurate.
- Slack integration: high-growth tech companies often live on Slack and send high volumes of NDAs. This means it’s useful for contract automation to integrate with Slack, for transparency between teams.
Stay in the systems you love with Juro.
The benefits of automating NDAs from templates
When Juro customers begin automating their NDA workflow, the benefits are immediate. They include:
- The correct NDA version is used: if teams generate NDAs from a defined template that legal owns, the risk of the wrong version being used is mitigated.
- NDAs are agreed faster: as a low-negotiation document, there’s no reason why NDAs should take much time at all to agree. Automation can make this a reality by removing bottlenecks from the process.
- Legal gets their lives back: without a constant stream of NDA queries, lawyers are empowered and enabled to do the actual work they trained to do, and be strategic partners to the business
- Reduce time wasted: Moving from the labour-intensive Word > comment > email > print > sign > scan process to an automated workflow typically saves Juro users up to 99 percent of time on NDAs.
Top tips for creating user-friendly NDAs
NDAs don’t need to be scary. It’s perfectly possible to create a watertight NDA that’s also simple, accessible, and user-friendly. Simplifying your NDAs will likely lead to faster signatures and better results for everyone involved. Here are some tips to making sure your non-disclosure agreements are easy to read:
1. Ditch the jargon
Contract terminology is difficult enough without being weighed down with language that doesn’t add anything. Try to say what you mean in plain English.
2. Prioritize the important information
Don’t bury the contentious bit that you know the counterparty will be looking for. Put the important information – like effective date, agreement length, and so on – front and center.
3. Use layering and linking
If you need to refer to a longer set of terms, like your standard site Ts and Cs or your data privacy notice, then use layering, cross-references or links to structure the document or point people to additional info.
4. Design with mobile in mind
The best contract collaboration platforms offer mobile-responsive, in-browser contract workflows. If you’ve engineered your NDA to be ready for a quick signature, can you give counterparties the power to eSign on the move?
FAQs about NDAs
1. What type of information isn't covered by an NDA?
Some categories of information will not fall under the scope of an NDA, these are often referred to as exclusions from confidentiality treatment. These exclusions typically include:
- Information that is publicly known or in the public domain
- Information that is already possessed by the recipient, without prior confidentiality restrictions
- Information that is accessed independently by the recipient
- Information that is required to be disclosed by the law
2. How can you get around a Non Disclosure Agreement?
If a party believes the terms of an NDA to be unenforceable, it is advisable to contact legal counsel for advice before proceeding. Certain circumstances will invalidate an NDA, and certain types of information can't be protected by an NDA - if you think this might be relevant, talk to a lawyer.
3. How can you break a Non Disclosure Agreement?
Contracts are legally binding and parties commit to be bound by their terms. However, there have been many high-profile instances of the validity of NDAs being questioned and parties being released from their confidentiality agreements. It is advisable to seek advice from a lawyer before taking any action.
4. Can you sign an NDA with an overseas party?
If you are signing an NDA with a party in a different country, you will need to ensure that the NDA outlines which jurisdiction’s laws will govern the agreement. You will also need to make clear which courts the agreement can be enforced in, to eliminate any confusion.
5. What happens if you break a Non Disclosure Agreement?
If you breach a confidentiality agreement, there may be a whole host of remedies available to the other party. The penalties for breaching an NDA may or may not be set out in the contract, but breach of contract has consequences - it is advisable to seek advice from a lawyer before you take any action.
Most often, these remedies might include damages, injunctive relief, and specific performance.
6. How long does a Non Disclosure Agreement last for?
A non disclosure agreement will last for the period specified in the legal agreement. However, the most common non disclosure agreement period is between 3 or 5 years, according to the UK government.
That said, certain confidential information could be kept confidential forever, such as a list of customers, or non-patentable know-how. Each non disclosure agreement should outline how long the confidentiality must last. Once this period has drawn to a close, the party will be able to use and disclosure the information.
When deciding how long your non-disclosure agreement should last for, you ought to think realistically about your business goals and strategies, as well as how long the relationship with the other party will last in general.
7. Who should sign an NDA?
It is important to ensure that the right individuals are signing the NDA on behalf of themselves or their company. These individuals will often include directors, officers or anyone else with the necessary authority to make such agreements.
However, more broadly, Non Disclosure Agreements can be signed by prospective employees, new clients, and other businesses.
8. Does a Non Disclosure Agreement need to be notarized?
Under English law, non disclosure agreements generally don’t need to be witnessed in order to be valid and enforceable. There may be some exceptions to this rule though, like if the document has been executed as a deed, instead.
Automate NDAs with Juro
If NDAs are a pain point for your business, and contract volumes are growing faster than legal headcount, then it might be time to explore contract automation as a solution. Juro is an all-in-one contract automation platform that helps visionary legal counsel and the teams they enable to agree and manage NDAs (and other contracts) in one unified workspace.
If you're ready to find out more, hit the button below to see what an automated NDA process could do for your business.