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.
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:
The document’s range will depend on whether it is a mutual or unilateral NDA.
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.
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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.
Mutual NDAs are helpful in situations like this, as they can help a business relationship develop by promoting trust and certainty between potential partners.
The repercussions of breaching an NDA will depend on the exact wording of the contract. Ultimately, breaching an NDA will usually result in:
Defending a court case regarding a breach of an NDA can be a long, expensive and unpleasant experience. As such, it is relatively uncommon for a party to leak confidential material after signing the agreement.
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.
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.
What if the receiving party refuses to sign an NDA?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.
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