A non-disclosure agreement, or NDA, refers to a document which binds two or more parties to ensuring that they do not share information pertaining to a company or an individual in an unauthorized manner. An example of this is when a company is working on a new invention, and does not want competing firms to get hold of the information regarding this. In such cases, leakage of the information could lead to undermining of the company that came up with the invention first.
The non-disclosure agreement in this case makes the signer obligated to not reveal trade secrets or other information as specified in the document. Usually, breaching this results in legal action such as fines. In other cases, the penalty for breaching a non-disclosure agreement could be more severe, depending on the type of company or organization one is working on.
Typically, the terms of the non-disclosure agreement vary depending on the nature of information being protected. For instance, some agreements extend beyond the period in which the individual is associated with the company. This means that even if they were fired or quit, they would still be bound by the non-disclosure agreement.
The critical nature of these types of agreements means that when drafting one, it is important to ensure that the document is as detailed as necessary, and that it also conforms to with state and federal laws. In addition to that, some jurisdictions might require further actions such as registration of the document for it to be legal. Consulting a lawyer when drafting the document is the most effective way of making sure that it is foolproof.