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Understanding Non-Disclosure Agreements

Posted on in Business Law

Arlington Heights business law attorneysYou have probably heard the term “non-disclosure agreement” more often than normal in the last few months. Recently, President Trump has been accused of having a relationship with an adult film star and using a non-disclosure agreement (NDA) to prevent her from discussing it with the press. There has always been a bit of confusion in the general population about exactly what the purpose of an NDA is and when to use this legal device. Non-disclosure agreements, also known as also known as confidentiality agreements, confidential disclosure agreements, proprietary information agreements, or secrecy agreements, can be a valuable tool for business owners.

An Unfair Reputation for a Valuable Legal Tool

An NDA is a legal contract that can exist between two or more parties that guides how confidential information should be kept private. For example, if two parties wish to discuss sensitive material without the threat of that information leaking to a third party, they can use an NDA to establish confidentiality rules. Doctor-patient confidentiality, attorney-client privilege, and bank–client confidentiality are forms of non-disclosure agreements. While often receiving bad press, an NDA by no means indicates that any illegal or unethical behavior is being protected.

Scenarios in Which an NDA is Useful

Some business owners and entrepreneurs use an NDA to protect sensitive information during the sale or licensing of a product. If someone has created a new technology or product and wishes to prevent a purchaser from using the information about the product against the creator, he or she can ask the potential buyer to sign a non-disclosure agreement about the information he or she learned during the transaction. NDAs can prevent unscrupulous individuals from using the results of your hard work as leverage in other negotiations.

NDAs can also be useful when a business owner wants to ensure that employees will not share private information about contractor and manufacturing agreements, copyrighted processes, or clients. For example, if your client has access to personal or financial details about your clients, having your employees sign an NDA prevents them from sharing this information and making you potentially liable. Business owners who are considering selling their business to another individual or party often use NDAs to protect the information potential investors or buyers will learn about their company. Unfortunately, it can sometimes be difficult to know when a potential buyer is serious and when they are only “fishing” for information. A non-disclosure agreement protects your business’s financial and legal interests.

Legal Guidance for Confidentiality and Non-Disclosure Agreements

If you are a business owner and have further questions regarding non-disclosure agreements or any other business-related legal matter, contact us to schedule an initial consultation with one of our skilled Arlington Heights business law attorneys. Call 847-749-4182 to reach our Arlington Heights office today.



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