NDA (Non-Disclosure Agreement) Definition

Non-Disclosure Agreement (NDA) Definition

A non-disclosure agreement is a common contract used by employers to prevent outside parties from disclosing confidential information to the outside world.

Companies working with members outside of the organization often must reveal sensitive information in order for the outside party to help the company, such as a consultant needing a company’s profit margins in order to provide guidance.

The purpose of an NDA is to protect the valuable intellectual property of a company, including patents, trade secrets, customer lists, production methods and marketing know-how.

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Major Components

An NDA has four major components:

  1. The definition of confidential information and how a person will know what information is confidential. Usually information already known by a person or told to them by an outside party is not confidential.
  2. The length of time the person cannot disclose confidential information, often extending into perpetuity.
  3. A list of people who the information can be disclosed to. This often includes employees, lawyers and accountants of the person as well as the government when the information is required to be disclosed under law.
  4. Penalties for disclosure of confidential information, often including the right to money damages as well as the right to force the person to stop disclosing the information.

In addition to the four major components, an NDA can specify whether the NDA be mutual or non-mutual, binding all parties to confidentiality, or only one.

Talk to a Financial Expert

We hope this has been a helpful read on the matter of Non-Disclosure Agreement. If you have any more questions, discuss them with a financial advisor in Livonia, MI or check out our financial advisor page to see the list of areas we serve.

What Is an NDA (Non-Disclosure Agreement) FAQs

NDA stands for Non-Disclosure Agreement.
A non-disclosure agreement is a common contract used by employers to prevent outside parties from disclosing confidential information to the outside world.
The purpose of a NDA is to protect the valuable intellectual property of a company including patents, trade secrets, customer lists, production methods, and marketing know-how.
Companies working with members outside of the organization often must reveal sensitive information in order for the outside party to help the company, such as a consultant needing a company’s profit margins in order to provide guidance.
The components of a NDA are: a definition of confidential information; the length of time the person cannot disclose confidential information; a list of people who the information can be disclosed to; penalties for disclosure of confidential information.
True Tamplin, BSc, CEPF®

About the Author
True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, his interview on CBS, or check out his speaker profile on the CFA Institute website.