What is a Mutual Non Disclosure Agreement

Contract Basics

At its core, a contract is the written agreement of a bargained for exchange between two parties.  In any contract, there must be consideration for the agreement to be enforceable.  Consideration is the underlying exchange between the parties that supports the contract.  Consideration is whatever a party gives the other – money, goods, services, or promises.  

A mutual nondisclosure, or mutual confidentiality, agreement is just a contract where the parties are agreeing to keep certain information confidential. A mutual nondisclosure agreement (mutual NDA) is one where both parties share confidential information with the other, and each agrees to keep the other party’s information secret, so the consideration is the mutual promises that each party makes to keep the other party’s information confidential.



Terms of the Mutual NDA

What terms should be included in a mutual NDA?

  • Clearly describe what information will be shared and will be considered confidential for each party. Explain what is NOT considered confidential information.

  • Describe why the information is being shared and how the information may be used by the other party.

  • Clearly state the length of term of the agreement – and what must be done with the confidential information when the agreement terminates.  Typically, it must be returned in a set timeframe, or if it cannot be returned, must be destroyed.

  • Describe any limitations about what information can be shared and who it can be shared with – the parties should keep any necessary information sharing limited to a “needs to know” basis.

  • Explain the parties' rights if the other party breaches the agreement by disclosing or misusing the confidential information.

  • The obligation to maintain confidentiality should last beyond the term of the agreement, and is only relieved in the event the information is rightfully and lawfully made public.


When and Where to Use a Mutual NDA

A mutual NDA can be a stand-alone agreement, or the pertinent terms of a mutual NDA can be incorporated into a larger agreement.  A common situation where a mutual NDA would be appropriate could include buying or selling a business when the parties are doing their due diligence.  Business coaches or consultants often use a mutual NDA so that they can safely share their intellectual property with their clients and the clients can confidently share pertinent details of the business during the coaching process.

Additional Considerations

Remember the best way to keep something secret is to keep it to yourself.  When you can’t keep sensitive or proprietary information it secret, always try to limit how much information is shared and with whom.  When that can’t be done, an NDA is your next best protection.


Source:- https://theknowlegaldigital.medium.com/what-is-a-mutual-nondisclosure-agreement-e718f358c42e

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