Smith + Schwartzstein
Located In Morristown, NJ and New York, NY

Drafting binding nondisclosure agreements requires care

Many business owners are required to disclose information to employees and contractors that is necessary for them to have in order to do their jobs or that they may become privy to in the course of their work. However, if the information got out, it could harm the company.

Often this involves propriety information related to a unique product or technology that you don't want competitors to have. It may even include ideas that are still being kicked around and haven't come to fruition yet. It could also involve marketing information and client lists. Often, companies want to guard their financial information.

A common way to discourage people from disclosing information to anyone outside the company or not authorized to have it is to require them to sign a nondisclosure agreement (NDA). However, you need to balance your need for confidentiality with the interests of those you're requiring to sign the agreement.

For example, a business owner may want to stipulate that the recipient of the agreement can never disclose certain information. However, the recipient may find that too onerous. Often, attorneys who deal with NDAs recommend a set term. It depends on the nature of the information. For example, technology moves so fast that a process or design that you're seeking to protect may be obsolete in five years.

Specificity and clarity are key to NDAs. Without them, a business owner who's the disclosing party in the NDA may find themselves in court with the receiving party arguing over whether the agreement was breached. Overly-broad terms can also help people find loopholes that allow them to divulge confidential information without legal ramifications.

There are certain elements that all NDAs should have as well as exclusions. However, it's never wise to use a template or do-it-yourself form. Your NDAs should be geared to the unique needs of your business.

You also want to ensure that they will hold up in court if challenged or breached. You want to be able to stop people who are divulging information that they agreed to keep confidential and potentially to seek compensation for damages caused by such breaches. That's why it's essential to consult with an experienced New Jersey attorney when you draft any type of confidentiality agreement or other contract.

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