What is a Non-Disclosure Contract?

A non-disclosure contract is also called a non-disclosure agreement (NDA), though it can have many other names. These are legal documents existing between a minimum of two parties, and they are designed to outline information that cannot be disclosed to parties beyond those who sign the agreement. The primary purpose of a non-disclosure contract is to create a confidential relationship, protecting proprietary information, trade secrets or other confidential information that is shared among the parties.

This legal document also can be referred to as a confidentiality contract, a non-circumvention agreement, a confidentiality agreement, a proprietary information agreement or a confidential disclosure agreement. Though there are many names to refer to this type of agreement, its purpose and application are the same. The most common use for a non-disclosure contract is to protect business or organization information that should not be released to the public.

When companies or individuals are doing business with one another, a mutual confidentiality agreement can allow them to become intimate with each other's business practices and other proprietary information without any risk. Non-disclosure contracts are not always mutual, but they can depend on what kind of information is at stake and who specifically wants to protect it. It is common for companies to require a signed non-disclosure agreement when hiring new employees who might become aware of private business information, for example.

When a non-disclosure contract is only a one-way agreement, it is often referred to as a unilateral NDA. This means that only one involved party has information that requires protection. In a mutual NDA, on the other hand, more than one involved party has proprietary information that requires utmost secrecy.

When companies work together, the use of a non-disclosure contract is common. Companies and other organizations might choose to draft a mutual non-disclosure agreement to protect proprietary information and business practices from one another. This way, if private information becomes known by one of the involved parties, that party will be legally restricted from repeating or using that information in any way. In some cases, even mentioning the existence of the contract itself can be restricted.

Any information that would not generally be known by the public can be protected by a non-disclosure contract. Each confidentiality agreement is unique between the parties that draft it, and it can contain many different clauses, depending on what information is at stake and who intends to protect it. Legal counsel is often required to go over the terms of a non-disclosure contract to ensure that it is legally binding and properly protects the information in question.