A nondisclosure agreement (NDA) is signed between two parties to restrict access and use of certain information to third parties. The agreement is in effect for a specified period of time after the two parties sever their business or working relationship. An NDA can protect from the loss of trade secrets or any type of proprietary information that the party does not want shared with the public, any other individual, or business.
In human resources, it is common for employees to sign a nondisclosure agreement with an employer. This agreement restricts the employee from using or sharing any information obtained through the business relationship with any third party, and protects from disgruntled employees sharing company secrets with competitors. This contract must be signed by both parties to be legally binding.
In other kinds of work arrangements, such as independent contractor or subcontractor relationships, a non-disclosure agreement can be invaluable in terms of protecting business information and clientele. By asking all new vendors or contractors to sign an NDA, the other party is made aware that they will be exposed to information about the business and its clientele. This process also notifies the other party that legal recourse is a possibility if information is used in a way that is detrimental to the business.
In the world of financial investors, NDAs can protect the financial and business records of clients and high-profile parties who choose to be anonymous. This can be a selling point with some investors who will only be part of transactions in which their personal identification is kept secret.
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