Small Business Contract Series — What to include in an NDA

What should a small business include in an NDA?

This is the third article in our series exploring small business contracts. Today, we’re focusing on the contract that protects your confidential information: the non-disclosure agreement. 

Note: this is not legal advice

From tech startups to big pharmaceutical companies, a wide range of businesses use non-disclosure agreements (NDAs) to safeguard sensitive information. Coca-cola’s been using them for over 100 years to help keep its world-famous recipe under wraps (along with locking the recipe in a vault). You can, too, if you have ideas, inventions or other confidential data you want to protect in your small business.

Protecting your trade secrets

Say you have a recipe, trade secret or  business plan that you don’t want your competitors to know about. Or you’ve got sensitive customer information like financial data that you need to protect. An NDA can come in handy here, stipulating who can see this information and how it can be used. 

Some businesses get employees to sign an NDA to ensure that internal secrets and confidential customer data aren’t leaked to the public or used for personal gain. Others might get a prospective partner to sign one while a deal is being negotiated to protect any business information shared as part of the deal.

If you think you need an NDA to protect your business information, read on for an idea of what’s in the fine print.

The breakdown of a typical NDA 

Every NDA is unique. That’s because every business is one-of-a-kind, too. The information and trade secrets you want to protect will differ (hopefully) from your competitors’. And the people you’re asking to sign it will be different, too. That said, the bones of the agreement remain fairly consistent from contract to contract.

To get started with your first NDA, you might want to try this free tool from the Australian Government, the non-disclosure contract generator. Remember, though, this tool (and the information we share below) are just a starting point — you should run your contracts past a legal expert before sending them out into the world.

Below are some of the most common things to include in an NDA:

• Names and contact details of both parties

• Date that the agreement commences

• Duration of the agreement (e.g. one year, five years, or indefinitely)

• A description of what type of information is being protected (without actually revealing what the secret is) 

• What the receiving party is or isn’t allowed to do with the information (e.g. they may be allowed to use it for internal research, but they are not allowed to share with other people in their business)

• What the receiving party should do with the information at the end of the NDA’s term (e.g. return or destroy it)

• Consequences of a breach

Once you’ve written your contract and had it checked over by a lawyer, then it’s ready to send. To make the NDA legally binding, you’ll need signatures from both parties. The most secure way to capture these is with Docusign eSignature, which comes with enterprise-grade security and compliance controls without sacrificing the user experience. Plus, it’s an easy and convenient experience for your signers — which can help build a great first impression if you’re dealing with prospective partners or new customers. 

If you think your small business has a trade secret worth protecting, then it’s definitely worth setting up an NDA for employees, suppliers and partners to sign. After all, you don’t want to keep your ideas locked up in a vault, do you?