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The importance of the nondisclosure agreement

| Nov 10, 2018 | Contract Disputes

Business owners and managers in Texas frequently must engage in conversations with others in which sensitive business information may need to be shared. Before doing this, it is wise to draft up a special contract designed to keep such information from getting into the wrong hands or in any way being used against their business. This is called a nondisclosure agreement or a confidentiality agreement.

As explained by Entrepreneur magazine, there are several situations which may necessitate the use of this type of contract. Discussions with other parties interested in buying a business, being a distributor for a company or licensing a company’s technology or products should only take place with a valid NDA in place. A company owner who is pursuing a potential partnership, merger or acquisition should also use this type of contract.

Many companies find it important to have employees and vendors sign confidentiality agreements as they must have access to protected data in order to effectively perform their jobs or the functions for which they are being contracted. A marketing agency is one example of a type of vendor that commonly signs NDAs.

Forbes highlights the importance of clearly identifying what information is included in the scope of the contract as well as the duration of the agreement. A nondisclosure agreement that is vague as to what material is deemed confidential may provide less protection if ever challenged. For long-lasting engagements, contracts should be reviewed prior to their expiration so that new agreements may be created to prevent any lapse in protection for either party.