Generally a prospective business partner will not share confidential information with you until both parties sign a Confidentiality Agreement or Non-Disclosure Agreement (“NDA”), and neither should you. A client recently asked me to provide it with the main points to consider when reviewing and NDA or Confidentiality Agreement. Here is a quick overview of the key provisions to watch out for.

1. Err on the Side of Mutuality – In the event you receive a “One-Way” Non-disclosure agreement, always insist on it being made into a “Mutual” NDA. Always protect your confidential information and trade secrets with Mutual NDA’s.
2. Distribution of Confidential Information – Always consider who will be reviewing confidential information. Consider whether it is prudent to include representatives such as brokers, accountants and attorneys, and financing sources like banks.
3. Excluded from Definition of Confidential Information – A listing of Exceptions to “confidential information” should be included such as generally accepted information or information that has already been disclosed. Consider whether you want to name this partner or client as a partner or client in marketing materials.
4. Standard of Care – You should never agree to keep the other party’s confidential information “strictly confidential” or “in trust”. This raises the level of protection you are required to provide.
5. License of or Restrictions on Use of Your Intellectual Property or Trade Secrets. You should never agree to any restrictions on your use of your own intellectual property or licenses to use your IP or trade secrets for evaluation.
6. Employee Solicitation – Certain parties will broaden the reach of their NDA’s by including non-competition and non-solicitation clauses. Never agree to these restrictions.
7. Termination – A provision of termination should always be included, and it should state that the agreement shall end somewhere between 1 and 5 years from the date.
8. Governing Law – Always have governing law be in your state. Delaware is also acceptable. Caution should be exercised if another state is chosen; particularly if that jurisdiction does not have a connection to your proposed transaction.

Those are the Top 8 terms typical to an NDA Agreement. If you are specific, thorough and forward thinking when devising your NDA, or working with your attorney to do so, then you will have a worthwhile and binding contract that will help you protect your business exponentially. Lack of proper terminology or omission of crucial elements could lead to the demise of your business, so take caution and enlist legal advice.