Certain categories of information, whether commercial or personal, can be incredibly valuable. In particular, a business idea or project that has the potential to revolutionise the market can constitute important and commercially sensitive information that should form the subject matter of a non-disclosure agreement if there is concern as to its security.
In both a business and a personal context, NDAs are useful in helping organisations and individuals protect confidential information and their interests, intellectual property and trade secrets. It is important to protect such information for many reasons, but primarily because the protection of this information prevents the disclosure of valuable commercial know-how to competitors and minimises the risk of business or personal losses.
This article presents a brief overview of NDAs and why anyone in the process of engaging a freelancer should have an NDA in place before sharing confidential information with the freelancer.
What is an NDA?
Non-disclosure agreements (NDAs), also known as confidentiality agreements, are legal agreements, typically between two parties, that prevent one, both or all of the parties involved from disclosing confidential information to third parties and from using the information for an unauthorised purpose.
The obligations in a non-disclosure agreement are usually imposed for a defined period of time, apply only to clearly defined information and cease to have effect in certain circumstances - for example, where the information protected under the NDA becomes public knowledge.
An NDA is effective because it is legally binding and is an enforceable legal contract. A breach of its terms will mean that the innocent party can pursue legal remedies, including claims for damages.
An NDA can be a standalone document or inserted into a contract as a confidentiality clause to create a confidential relationship between the parties involved (in relation to the information defined as confidential by the agreement).
NDAs can be mutual, unilateral or multilateral. A mutual NDA is used where each party is disclosing confidential or private information. A unilateral NDA is used when only one party is disclosing information. An NDA between a start-up and a potential investor will be unilateral, as only the start-up will be disclosing confidential information.
NDAs can be used in many different business contexts. For example, businesses often enter into mutual NDAs with potential partners in order to protect sensitive commercial information and intellectual property that may be disclosed by each party to the other throughout the partnership.
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Why is it important to have an NDA in place if you are engaging freelancers to work on a project?
No business can keep commercially sensitive information relating to its activities confidential forever. Inevitably, most businesses seek funding from investors, enter into partnerships with other companies or hire freelancers or independent consultants. In all of these situations, information relating to the business's confidential ideas, trade secrets or commercial know-how must be shared to enable the working relationship to function smoothly.
Generally, a non-disclosure agreement should be used every time a business has to share sensitive proprietary information with a freelancer in order to allow the freelancer to carry out the project that they were engaged to complete. Without an NDA, sensitive data and information can be leaked to competitors and can cost the owner of the information its competitive edge.
Freelancers often work with several clients at any one time, and often employ the same skills and complete similar tasks across their time with different clients. To prevent any intentional or inadvertent leak of the sensitive confidential information of any one of these clients to the other, freelancers are often required to sign an NDA before they begin working for a new client. This should always be the case when a new client is engaging the freelancer to work on a project that draws upon the client's commercial know-how and sensitive commercial information.
Freelancers are also likely to be asked to sign an NDA before they begin working on projects that are entirely novel (e.g. a novel mobile or web app). This is to ensure that know-how relating to other companies or organisations before the launch of the project, which would cost it its competitive advantage.
Entering into an NDA with a freelancer helps to build trust between the freelancer and the client, which may not be as easily built up as would be the case in a traditional employment relationship, which is often conditional on satisfactory references and background checks, and is imbued with a mutual duty of trust and good faith.
It will also ensure that the freelancer is given the information needed to complete the project and is also given clarity as to exactly what information is to be kept confidential both during and after the engagement.
It is also important to be aware of situations when NDAs cannot be of use. For example, NDAs cannot protect information that is in the public domain or that formed the prior knowledge of a signatory. If a start-up, of its own volition, is sharing its business ideas and know-how at public networking events, this information cannot then form the subject matter of a freelancer NDA.
Important Considerations and Key Terms
While each organisation's NDAs will be unique (depending on the exact nature of the information to be protected and the authorised uses of that information), the format of NDAs is generally standardised and imposes certain obligations on the recipient party - not to discuss the subject matter of the NDA with third parties and not to use the information in an unauthorised manner.
Most NDAs will typically centre on the following:
- Which parties are bound by the agreement?
- The definition of "confidential information" i.e. exactly what information is to be kept confidential?
- The consequences of a breach
The disclosing party must be clear about the exact purpose for which the recipient party can use the information, and must ensure that the confidential information to be protected is set out as specifically as possible in the NDA.
The Bottom Line
Keeping confidential information safe by using an NDA often means that work can be done in a way that does not compromise the security of sensitive information. It also prevents any losses that may follow the disclosure of sensitive commercial or personal information.
How do I make an NDA?
An NDA can be created on a contracting platform like Legislate by answering a few simple questions and choosing the key terms of your agreement. The NDA can be signed and sent to the other party to sign on Legislate as well. Unlike Getting templates online, Legislate guarantees NDAs which are up-to-date with the law, lawyer-reviewed and simple to understand. You can read our tutorial on NDAs.