You’ve probably heard it before: “We just need you to sign our standard NDA first. We’ll send it through. You just need to sign and send it back.”

Is it OK to sign the other party’s standard non-disclosure agreement (NDA) (also commonly known as a ‘confidentiality agreement’)? Will your company’s standard NDA be the right fit for the discussions you are about to have? Maybe, but it’s probably best to understand the NDA and whether it is suitable for the circumstances first.

Contrary to what some people may think, not all NDAs are the same. Here are some issues to think about:

What ‘Confidential Information’ will be covered?

The obligations under a typical NDA are based around protecting what is defined as ‘Confidential Information’. It is common to see very broad definitions of ‘Confidential Information’, so that the agreement covers essentially everything provided by one party to the other, or everything about one party that is known to the other party, except for information in the public domain. This may be appropriate, but you need to be aware that it may mean that a very wide range of information is covered by the agreement, so it may be very onerous or simply impractical to fully comply.

If there is only a small range of information that really needs to be protected, it may be best to define ‘Confidential Information’ much more specifically.

‘Approved Purpose’

It is usual for a NDA to set out an ‘Approved Purpose’ or ‘Permitted Purpose’, which is the only purpose for which the receiving party is permitted to use the Confidential Information. It is important to get this right.

Responsibility for accuracy of information

It is common for standard NDAs to include a clause that seeks to exclude the disclosing party’s responsibility or liability for the accuracy or completeness of the information disclosed. Sometimes we see the opposite: a clause providing that the disclosing party guarantees the accuracy and completeness of the information.

Care and consideration should be given to these clauses before agreeing to them. What if the whole purpose of your dealings with the other party is that they are giving you materials that you should be entitled to rely on? Or the opposite, are you doing the other party a favour and want to minimise your liability in relation to the information, but you have just signed up to an agreement with a specific warranty of accuracy and completeness?

Who can be given the information?

Most of the time an NDA will be entered with a company. But when the information is disclosed, which individuals within the company receiving the information should be allowed to access it?

It is usual for an NDA to provide, at a minimum, that the information can only be shared within the company with individuals who have a need to know the information in relation to the Approved Purpose and that the company is responsible for ensuring that the individuals comply with the terms of the NDA. This may be appropriate, but you may also want to consider a more restrictive approach if you are the “disclosing party”. For example, this could include an obligation on the receiving party to ensure that all individuals to whom it provides access to the confidential information sign a personal confidentiality undertaking which is provided to the disclosing party.

Putting the right templates in place

Your organisation can more efficiently enter into suitable NDAs by having the right templates in place that take account of these and other issues in accordance with your organisation’s circumstances and needs.

Please feel free to contact any member of the Sierra Legal team to discuss how we can assist.