- 15 min read
- NIA BALBO
Introduction
As a refresher, a non-disclosure agreement (NDA) is a contract that provides a legal framework for protecting and using specific sensitive information. But there is more than one type of NDA and the one you use will depend on the parties involved and the shared data scope.
The right NDA is a game-changer for protecting your enterprise’s private information. No matter what your role in an organization, when you don’t know what NDA type to start with you’re bound to experience slower contract reviews and multiple revisions with your legal team.
Keep reading to learn why knowing about the different types of NDAs is important, which ones to use and when, and how you can effectively manage them for ideal business results.
Importance of Understanding NDA Types
We mentioned a few repercussions of not knowing about the different types of NDAs can have on your workload and your organization, but there are several reasons to expand your NDA vocabulary:
- Negotiation Leverage – Being informed can help you advocate for terms that best protect your interests and understand the concessions you might need to make.
- Risk Management – Understanding different levels of liability within types of NDAs can help you manage potential risks associated with sharing or receiving confidential information.
- Compliance and Penalties – Knowing the specific terms and penalties for breaches can aid in compliance and mitigate risks associated with potential penalties.
- Industry and Contextual Relevance – Many industries have standard practices or legal requirements affecting how NDAs should be structured.
- To Protect Confidentiality – Understanding the varieties helps you choose the right one to protect confidential information. For example, a unilateral NDA is suitable when only one party is sharing sensitive information, whereas a mutual NDA is used when both parties exchange confidential data. More on this below!
Three Types of NDAs
Non-disclosure agreements fall into three main categories. You need to carefully consider which type of contract will best suit your business needs.
Let’s take a closer look at each.
1. Unilateral NDAs
These are also known as “one-sided NDAs.” In this contract, only one party will share private information. The other party must then keep the information outlined in the agreement private.
Unilateral agreements are the most common type of NDA. Here are a few specific instances you’d use one:
Employee Agreements
As part of their onboarding and ongoing tenure, team members will have access to everything that makes your organization tick.
An NDA protects all that information from being shared outside employees’ scope of work during their employment, and once they’ve left the enterprise.
Contractor Agreements
Similar to employees, contractors are privy to a lot of sensitive company information. The biggest difference is you’re rarely the only one they’re working for.
You can use a non-disclosure agreement to restrict contracted workers from sharing confidential company data or using that information to help businesses besides your own.
Buyer Agreements
You share a lot of information during the various stages of a sales deal. NDAs come in handy for ensuring buyers don’t share data relating to:
- Company technology
- Production or operations processes
- Intellectual property
Evaluator Agreements
When you’ve worked to create a new technology or product, you’ll want to ensure no one can steal your efforts. As you have evaluators examine your work, you can use non-disclosure disagreements to protect data related to your invention.
2. Bilateral NDAs
These are also known as “mutual NDAs.” In this agreement, both parties share confidential data and individually decide how that information is used and protected.
Parties often use bilateral NDAs when mutually sharing large amounts of information, such as during M&A due diligence or ongoing partnerships.
3. Multilateral NDAs
These are also known as “multiparty NDAs.” Multilateral NDAs require three or more parties to disclose and protect private information.
You most often see these agreements used in partnerships between multiple enterprises or negotiations between multiple countries, such as trade agreements.
Now that you know the different types of NDAs you can use, you can make savvier choices in safeguarding your company’s private data.
Best Practices for NDA Management
How you manage your non-disclosure agreements is just as important as the information included in them. Here are a few things to keep in mind.
1. Determine the Right NDA
Who’s sharing what in this business deal? Consider how many parties are disclosing information.
Just you? Pick unilateral.
You and another business? Bilateral should do the trick.
Is there a whole group of parties sharing sensitive data? Multilateral is the way to go.
2. Author the NDA
Define the confidential information protected by the contract, the scope of the agreement, and applicable timeframes. If possible, leverage a template to do this before sending it to legal for review.
Remember, you need to be specific here. You’ll have a hard time enforcing the agreement in court if you’re too general.
3. Be Careful During Negotiations
As specific as you should be in the contract language, don’t accidentally reveal confidential information during your negotiations. Speak more generally while focusing on the limitations of the contracts.
4. Leverage CLM Tools to Optimize Contract Performance
Especially if you require every new business deal to commit to confidentiality, you can have thousands of NDAs to oversee within your contract portfolio. There’s no way to effectively track all that contract data and manage obligations manually.
Instead, use advanced contract management tools to:
- Efficiently draft NDAs
- Upload and store approved templates
- Streamline edits and negotiations
- Easily notify signers of waiting documents
- Track obligations and deadlines
- Securely store NDAs in a cloud-based contract repository
- Report on relevant contract data
Safeguard Your Enterprise With Contract AI
No matter what type of NDA you need, one thing remains the same: you need to draft them correctly and efficiently.
Sirion’s AI allows you to effectively draft, negotiate, and manage your contract portfolio. With us, you have one platform for your complete contract lifecycle management journey.
Learn how you can leverage our AI to transform your enterprise contracting. Read the full guide.
Additional Resources
15 Types of Business Contracts and Using AI to Improve Them
Defining Post-Negotiation in Contract Management
6 Contract Management Software Benefits For Enterprise Success
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