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Should you sign an NDA when entering into a partnership?

On Behalf of | Aug 10, 2023 | Business law

In the world of business partnerships, it is not uncommon to share sensitive information with partners during the course of a partnership. While doing so, however, it’s vital to keep confidential data from the public and your competition. And this is where a Non-Disclosure Agreement (NDA) comes in.

At its most basic, NDAs are legal agreements that safeguard sensitive information from improper handling and use. If you are planning to get into a partnership, it is crucial that you include NDA in your to-sign documents.

NDAs must be specific

Most people associate NDAs with employees who handle confidential information during the course of their work. However, they can also be a powerful tool for enterprises seeking to protect crucial information from partner misuse.

For an NDA to be legally binding and, thus, enforceable, however, it must meet certain elements. In other words, an NDA must:

  • Specify the duration within which the proprietary information in question must be kept confidential. This must be a “reasonable and necessary” period. In the context of business partnerships, this may last the entire duration of the partnership.
  • Specify the jurisdiction in which the NDA will apply. Basically, this depends on the nature of the partnership, where you are conducting business as well as the location of your main competition.
  • Clearly explain the proprietary information that you are seeking to protect with the NDA. It’s crucial that you are as specific as possible. And whatever you are seeking to protect must have “legitimate business interest.”
  • Articulate each partner’s obligation in protecting the proprietary information. For instance, you may explain the ramifications of breaching the NDA. These can take the form of financial compensation, legal action or termination of the partnership agreement in extreme cases.

Every business partnership is unique. If you are working towards a partnership with a like-minded entrepreneur, and you have pertinent information that you wish to protect, then it is in your best interest that you consider drafting a non-disclosure agreement before moving forward.