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The use of an NDA or Non-Disclosure Agreement is extremely important in business. Basically, the agreement prevents someone from releasing confidential information provided to it by its owner to a third party.

Sensitive financial and legal information must remain private in order to safeguard the intellectual property and financial circumstances of a company. NDA’s are used regularly in discussions relating to the purchase and sale of a business.  The information must be disclosed so the purchaser can make an informed decision; however, that information is intended only for the party that it is released to and whom has executed the NDA.

The NDA will be enforced during the term of the contract, negotiations, employment and equally as important, after termination of those relationships. These covenants are useful for employers to have an employee sign. During or after termination, employment sensitive materials would be available to the employee which could, if sold or otherwise circulated, harm the business interest of the company.

In some cases, the NDA’s that are exchanged are mutual. In other words, both parties will disclose documentation, financial statements, employee lists and intellectual property etc., and both agree to protect the other’s confidentiality.

This type of mutual NDA is often used where companies form a partnership or a joint venture for a specific project. Each party has to know that the other has the financial wherewithal to live up to their end of the bargain.

Of course, in drafting the covenant of non-disclosure there are specific penalties that are set out in the event of a breach of the agreement of non-disclosure.  The remedies set out in most cases are an injunction to prevent further release of the confidential information and of course damages against the party disclosing the private information in the event that the business or individual suffers any losses as a result of the “leak”. As always, the documents should be read carefully and thoroughly before signing. They quite often use “standard” wording agreements, but they can have differing terms depending on the circumstances under which the NDA is being asked to be signed.

If you are uncomfortable or unclear with the wording of the document presented, you can and should contact your lawyer for their advice.

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