Are you legally required to title it a “Non-Disclosure Agreement”
A gripping subject, I know (that’s sarcasm) – but a fair question, none-the-less.
Are you legally required to title your agreement a Non-Disclosure Agreement?
As is the norm with non-disclosure agreements, the simple answer to this is ‘no,’ but there’s more to it than that when it comes to application.
So, let’s break it down and discuss what this agreement is, alternative names for it, and when and how to use each.
Summary of a non-disclosure agreement
A non-disclosure agreement is a legal contract between 2 or more parties which places an obligation on the parties to provide privacy for secrets and proprietary information that’s shared during the course of business.
These agreements, or NDAs as they’re often referred, should be customized for each and every situation in which they’re used. The details of the agreement will vary depending on the preference of the parties, the information being shared, the circumstances surrounding the project, and a number of other variables.
A foremost consideration when drafting a non-disclosure agreement is to determine if the confidentiality duty is mutual or one-way.
In other words, are both parties sharing private information or only one? The party disclosing the information is called the Disclosure or Disclosing Party.
The party receiving the information is called the Recipient or Recipient Party. Depending on whether the agreement is mutual or one-way, there may be more than one of each type of party.
While there’s no “boilerplate” non-disclosure agreement for all type of business and situations, and each agreement should be modified for the particular situation of your business, there are a few items that should be included in your agreement each and every time you draft and implement one:
- A definition of what is considered “confidential” and a description of any exclusions to what “confidential” is.
- You should include a detailed timeframe, as some confidential information expires after a certain event or time period, while other secrets should be maintained indefinitely (such as trade secrets).
- The obligations and duties of the parties should be clearly worded and defined.
Common uses of the non-disclosure
Non-disclosure agreements are one legal tool with many varied purposes. Always, this type of legal agreement’s role is to protect intellectual property and other confidential information. But the circumstances under which it does so are wide and diverse.
New Business. Any new business, including a start-up, joint venture, partnership, or merger, is likely to be disclosing confidential information to various other parties.
Whether it be the party you’re merging with, or a third party such as an attorney or financial advisor, privileged information is almost inevitably going to be shared so these non-disclosure agreements are commonly used in these situations.
Subcontracting. Subcontractors are often utilized when you need a particular area of expertise not available within your own circle. They may be brought in for a single project or as a recurring contributor.
Either way, in order for many subcontractors to sufficiently fulfill their role, they’re going to need access to some of your confidential information. They may need to see your clientele list, review your financial statements, or learn about your pending patent. Before you grant them access, implement a non-disclosure agreement.
Development. Similar to subcontracting, development often involves the use of a third party. In technology industries this is particularly common and often involves the disclosure of your most coveted Intellectual Property secrets, so a solid non-disclosure agreement is an absolute must-have.
Employees. A vital part of business, employees can be both a blessing and a curse. While necessary for you to fulfill your business obligations, employees also impose somewhat of a risk. When employees have access to any of your confidential information, you always take the chance that your confidential information will cease to be confidential once an employee leaves your company.
A non-disclosure agreement can help protect you against such damaging disclosures.
Alternative titles of the non-disclosure
With the basics behind us, let’s move on to the question as hand.
While there doesn’t appear to be any hard and fast rule dictating the title of your non-disclosure agreement, there are a small handful of established and respected titles and I’ve yet to find evidence that it’s appropriate to veer from them.
“Non-Disclosure Agreement” is the standard title for a contract that seeks to protect against the disclosure of confidential information and trade secrets.
Easily recognizable by its universally-used abbreviation (“NDA“) the “Non-Disclosure Agreement” title is probably the most widely known.
It does, however, appear to be more popular in the U.S., as opposed to Europe and Australia, who favor other terms.
The term “Non-Disclosure Agreement” is also preferred as a title for one-way agreements wherein only one party is bound to the promise of non-disclosure because they’re the only ones receiving confidential information.
Furthermore, this title also seems to be a better fit for third party and subcontractor situations wherein the Disclosing Party seeks to bind a third party to secrecy when trade secrets are necessarily disclosed, such as pricing information, patents, inventions, etc.
“Confidentiality Agreement” is easily the most recognizable term, after the NDA title, of course.
A favorite in England and Canada, the term “Confidentiality Agreement” is often used when a higher level of care is expected.
“Non-disclosure” signifies a simple obligation not to disclose while “Confidentiality” imposes a strict standard to not only not disclose, but to proactively work to keep confidential information a secret.
In other words, whereas a “Non-Disclosure Agreement” binds your partner, subcontractor or employee to secrecy, a “Confidentiality Agreement” will require that your potential partner take extra precautions to protect documents, screen emails and other digital communications, and take other necessary measures that will protect the confidential information from slipping into the wrong hands.
Mind you, using the term “Confidentiality Agreement” doesn’t legally bind the Recipient Party to a higher standard of care and using the term “Non-Disclosure Agreement” can afford you just as much protection because, really, it’s the content of the agreement itself that matters most – not the title.
However, psychologically speaking, the term “Confidentiality” refers to the obligation in a positive and proactive manner, as opposed to “Non-disclosure” which is a negative and static term.
This is also likely the reason why the term “Confidentiality Agreement” for this type of legal agreement’s title is more often used in employment agreements and personal situations, such as mergers or partnership negotiations.
“Confidential Disclosure Agreement“, known as “CDA” for short, is an apparent conglomeration of the former two titles but is essentially the same exact contract in substance.
I found reference to this title only twice, but both times it was in relation to product development.
IBM, for example, uses this title, as well as some in the pharmaceutical development industry.
Some parties prefer to cover all their bases and title the agreement “Confidentiality and Non-Disclosure Agreement.”
Again, there appears to be no difference in substance, and the title may actually be redundant. None-the-less, with the right content, the non-disclosure agreement with a dual-title may suit your preference and protect your trade secrets just fine.
Aside from these standard titles, I have come across a few slight variations.
An “Agreement for Exchange of Confidential Information” appears to be a software industry favorite.
As it’s name suggests, this agreement is used solely for mutual disclosures. Other than the variant title, however, the content looks to be no different than a standard “Mutual Non-Disclosure Agreement“:
A European variant is the “Memorandum of Understanding and Non-Disclosure Agreement.”
The Memorandum of Understanding aspect of the agreement clearly defines the working relationship between two businesses or companies, particularly with relation to a joint project.
Line items such as communication, information exchange and terminating the agreement are included. The “Non-Disclosure Agreement” is merely an addition to the “Memorandum” that emphasizes the importance of confidentiality of information exchanged during the joint venture.
The non-disclosure can be a full agreement or can essentially be an extended clause to the Memorandum:
How to title the agreement
So, how does one decide what to title their “Non-Disclosure Agreement” ?
My first suggestion would be to not think too hard and long about it. Many standard labeled Non-Disclosure Agreements have held up just fine in court and provided exactly the type of protection it’s drafters intended.
That said, common sense should also prevail.
An “Agreement for Exchange of Information” is clearly intended to be the title of a mutual agreement, for example, and there’s no need to get fancy or showy with your title as you may risk confusing the courts with your intent.
And while it’s important for the title to make clear what the agreement is about, the content of the agreement itself is ultimately what will protect your business interests the most.
Credits: Icon Document by S Madsen from the Noun Project.
Nov 16, 2017 | Non-disclosure Agreements
This article is not a substitute for professional legal advice. This article does not create an attorney-client relationship, nor is it a solicitation to offer legal advice.