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You are racing against time to draft an NDA. Your company’s sensitive information is on the line, and you can’t afford a mistake. You need a solid unilateral NDA, but legal jargon and complex clauses slow you down. It’s frustrating, right? 

This is why getting the unilateral NDA right is so crucial. In this post, we’ll show you how to draft a clear, effective unilateral NDA, making your job easier and your information secure.

What is a unilateral NDA?

A unilateral Non-Disclosure Agreement (NDA) is a legally binding contract where only one party discloses confidential information, and the other party is obligated to keep it secret. It is commonly used when sensitive information is shared with employees, investors, or consultants. 

By signing a unilateral NDA, the recipient agrees not to disclose or misuse the information, protecting the disclosing party’s trade secrets, business plans, and proprietary data. This ensures that confidential information remains secure and fosters trust in business relationships.

Types of NDAs

Understanding the different types of Non-Disclosure Agreements (NDAs) can help you choose the right one for your specific needs. Here’s a breakdown:

  • Unilateral NDA: In this agreement, one party discloses information, and the recipient is obligated to keep it confidential. This is common in employer-employee relationships, startups seeking investors, and companies working with consultants
  • Mutual NDA: Both parties share confidential information and agree to protect each other’s information. This is often used in joint ventures, mergers, and partnerships where both sides exchange sensitive data
  • Multilateral NDA: This is used when three or more parties are involved, and at least one discloses confidential information. It simplifies the process by having a single agreement for all parties rather than multiple bilateral agreements.
Also read: How to Review Non-Disclosure Agreements (NDAs) 

Difference between a mutual NDA and a unilateral NDA

A mutual NDA is used when both parties will be sharing confidential information. It’s a two-way street where each party agrees to protect the other’s information. You typically see mutual NDAs in joint ventures, mergers, and partnerships where both sides have valuable information to protect.

In contrast, a unilateral NDA is a one-way agreement where only one party discloses confidential information. The recipient is obligated to keep the information secret. This is common in situations like employer-employee relationships, startups pitching to investors, or companies working with consultants.

Key differences:

  • Scope of obligations: In a mutual NDA, both parties have to maintain confidentiality, whereas in a unilateral NDA, only the recipient is bound by confidentiality obligations
  • Use cases: Mutual NDAs are ideal for collaborations where both sides exchange sensitive data. Unilateral NDAs work well when only one party needs to share information
  • Complexity: Mutual NDAs are often more complex due to the reciprocal nature of the obligations, while unilateral NDAs are simpler and quicker to implement

Mutual NDAs promote equal protection and trust, facilitating open exchanges of information, and so, they are ideal for collaborative environments where mutual trust is crucial.

Unilateral NDAs are easier to draft and enforce due to the one-way nature. This is why they are suitable for scenarios requiring quick, straightforward confidentiality agreements.

Why do you need a unilateral NDA?

A unilateral NDA is essential for legally safeguarding your confidential information from unauthorized disclosure. When you share proprietary information with employees, investors, or consultants, this agreement ensures that your trade secrets, business plans, and other sensitive data are protected.

For businesses, using a unilateral NDA is a proactive measure to maintain control over valuable information. It helps prevent misuse or unauthorized sharing, giving you peace of mind and allowing for open, yet secure, communication with trusted partners.

Real-life use cases

  • Startups and investors: Startups often need to share their innovative ideas and business strategies with potential investors. A unilateral NDA can help protect these ideas from being misused or disclosed without permission. For instance, a tech startup might share details about a new software application with a venture capitalist. The NDA ensures the investor cannot share or use this information without the startup’s consent, maintaining the startup’s competitive edge and fostering trust during investment negotiations

  • Employer-employee relationships: Companies frequently disclose confidential information to employees, such as trade secrets, marketing strategies, and customer lists. A unilateral NDA can prevent employees from sharing this sensitive information, both during and after their employment. For example, a company might develop a unique marketing strategy that gives it a competitive advantage. By having employees sign a unilateral NDA, the company ensures this strategy remains confidential, protecting its market position

  • Consultants and freelancers: Businesses often hire external consultants or freelancers for specific projects that require access to proprietary information. A unilateral NDA ensures that the consultant cannot disclose or misuse this information. For instance, a company developing a new product might hire a consultant to assist with the project. The NDA protects the company’s intellectual property, ensuring the consultant uses the information solely for the project’s purpose and does not share it with others
Also read: NDA vs. Confidentiality Agreement: Which One to Choose?

What are the benefits of a unilateral NDA?

Using a unilateral NDA offers numerous benefits for businesses, ensuring the protection of sensitive information while fostering trust and cooperation in various professional relationships. Here’s a detailed look at why you should consider implementing this type of agreement:

#1 Protects intellectual property

A unilateral NDA is a powerful tool to safeguard your intellectual property, such as trade secrets, business plans, and proprietary information. By legally binding the recipient to confidentiality, you can prevent unauthorized use or disclosure of your valuable information, ensuring it remains secure and protected.

#2 Facilitates open communication

When parties know that their confidential information is protected by a unilateral NDA, it encourages open and honest communication. This is particularly important in partnerships and collaborations where sharing detailed and sensitive information is necessary to achieve common goals. The assurance of confidentiality fosters a collaborative environment, enabling more effective and transparent discussions.

#3 Helps maintain a competitive advantage

Keeping sensitive information confidential is crucial for maintaining a competitive edge in the market. A unilateral NDA ensures that your business strategies, product development plans, and other proprietary information are not disclosed to competitors. This protection helps you maintain your unique position and advantage in the industry.

#4 Simplifies legal processes

Unilateral NDAs are typically simpler to draft and enforce compared to mutual NDAs. This simplicity can be beneficial when time is of the essence, such as when onboarding a new employee or quickly engaging with a potential investor. The clear, one-way obligations reduce the complexity and speed up the legal processes involved in protecting your information.

#6 Reduces risk in employee relationships

Employers often need to share confidential information with employees, such as during training or while discussing strategic plans. A unilateral NDA can mitigate the risk of this information being misused or shared with competitors, both during and after the employment period. This protection is essential for maintaining the integrity of your business operations.

#7 Enhances investor confidence

Startups and businesses seeking investment often need to disclose sensitive information to potential investors. A unilateral NDA provides legal assurance that this information will remain confidential, which can enhance investor confidence. Investors are more likely to engage and provide funding when they know that their discussions and the information shared are legally protected.

#8 Streamlines engagements with external consultants

When working with external consultants or freelancers, a unilateral NDA ensures that any proprietary information shared for the purpose of the project is kept confidential. This legal safeguard allows you to collaborate effectively without the fear of your confidential data being exposed or misused. It also establishes a clear framework for how the consultant should handle your information.

What to include in a unilateral NDA

When drafting a unilateral NDA, several key elements must be included to ensure its effectiveness and enforceability. Here’s a breakdown of what you need to include:

  • Introduction of the parties: Clearly identify the parties involved in the agreement. Use the full legal names and addresses of the disclosing party and the recipient. This section establishes the relationship between the parties and their respective roles in the agreement

  • Definition of confidential information: Specify what constitutes confidential information within the context of the NDA. Be as specific as possible, detailing the types of information that should be treated as confidential. This can include trade secrets, business plans, financial data, customer lists, and other proprietary information the disclosing party wishes to protect

  • Recipient’s obligations: Outline the duties of the receiving party regarding the confidential information. Clearly state that the recipient can only use the information for the purpose intended by the owner. Additionally, detail any limitations on sharing the information within the recipient’s organization and the measures required to maintain its confidentiality. This section should also include protocols for handling both electronic and hard copies of the confidential information

  • Exceptions and limitations: Define any circumstances under which the recipient’s disclosure of confidential information would not be considered a breach of the NDA. Typical exceptions might include situations where the information becomes publicly available through no fault of the recipient, is independently developed by the recipient without using the confidential information, or is disclosed with the disclosing party’s consent

  • Term and termination: State the duration for which the recipient must keep the confidential information private. Depending on the nature of the information and the disclosing party’s needs, this can be a set period or an indefinite obligation. Also, outline the circumstances under which the NDA can be terminated, such as mutual agreement or breach by either party

  • Remedies and penalties: Describe the consequences that the recipient will face if they breach the NDA. This can include monetary damages, injunctive relief, or other remedies available under applicable laws. Clearly defining these penalties can deter potential breaches and emphasize the importance of maintaining confidentiality 

Download the FREE unilateral NDA template

This unilateral NDA template has been carefully crafted by the legal experts at SpotDraft to ensure it covers all essential aspects of this type of NDA.

How to download the template:

  • Click below to navigate to the download page
  • Provide the necessary information in the form to help us understand your needs better
  • Once you submit the form, the template will be sent directly to your inbox, ready for you to use and customize as needed

Note: While this template provides a robust framework to start from, it is crucial to tailor the details to your specific circumstances.

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Also read: What is a Business Associate Agreement + Free Template

Best practices for writing a unilateral NDA

Implementing these best practices when drafting a unilateral NDA ensures that your confidential information is well-protected and that the agreement is clear, enforceable, and tailored to your specific needs.

#1 Maintain clarity and specificity

Clarity and specificity are crucial when writing a unilateral NDA. Use precise language to avoid ambiguities. Clearly outline what constitutes confidential information and the recipient’s obligations. 

“Avoid unnecessary complexity and shoot for short sentences. Always ask yourself if what you wrote down is clear – could a judge or jury understand the section if there was ever litigation?  If not, rework it.  For example, think about this statement, ‘This Agreement will terminate on August 31, 2021.’  Does this mean that it terminates when the day starts? When the day ends? And when does the day end? At the end of the business day, at midnight, and in what time zone? The better sentence is ‘This Agreement will terminate on August 31, 2021, at 11:59 p.m. Central Time.’ Be precise and concise!”

~Sterling Miller, CEO, Hilgers Graben
Ten Things: Making Contracts Easier to Sign

Here are some tips and examples to ensure clarity and specificity in your NDA:

  • Use precise definitions. Clearly define “confidential information” in your NDA. Instead of vague terms, specify the types of information covered. For example, rather than saying “confidential information includes business strategies,” you can say, “confidential information includes business strategies such as marketing plans, financial projections, and customer data”
  • Specify recipient’s obligations. Clearly detail what the recipient must do to protect the confidential information. For instance, state, “The recipient must keep the information secure and only share it with employees who need to know for their job duties.” This reduces the risk of misunderstandings about what actions are required to maintain confidentiality
  • Provide concrete examples. Including specific examples can help clarify what is covered by the NDA. For instance, “Confidential information includes, but is not limited to, sales reports, customer lists, product specifications, and software source code.” This makes it clear which types of information are protected and helps prevent disputes
  • Include actionable steps for protection. Detail how the recipient should handle the confidential information. For example, “The recipient must store all confidential documents in a locked cabinet and use password protection for digital files.” Providing these specific steps helps ensure the recipient understands their obligations

  • Avoid legal jargon. Use plain language to make the NDA easy to understand. Instead of complex legal terms, opt for straightforward language. For example, “The recipient agrees not to share the information with anyone outside the company” is clearer than “The recipient covenants to refrain from disclosing the information to third parties”
Also read: 10 Tips to Maintain Clear Contract Language

#2 Ensure legal compliance 

Ensuring legal compliance is essential when drafting a unilateral NDA. Here’s how you can do it:

  • Stay informed on relevant laws. Laws affecting NDAs, such as the Uniform Trade Secrets Act (UTSA) or the Economic Espionage Act (EEA), can change. Regularly review these laws to ensure your NDA remains compliant. For instance, if the UTSA is updated to include new definitions of trade secrets, update your NDA accordingly

  • Consult with external legal advisors. Regular consultations with legal advisors can provide insights into the latest legal standards. They can help identify any changes in law that could impact your NDA. For example, if a new law affects how long confidential information must be protected, your legal advisor can guide you on necessary updates

  • Use legal databases. Access legal databases like Westlaw, LexisNexis, or Bloomberg Law to stay current with legal changes. These databases provide comprehensive updates on legislation, case law, and regulatory changes. For example, you might find a new court ruling that impacts how NDAs are enforced, prompting you to revise your document

  • Tailor your NDA to specific jurisdictions. Different states or countries may have varying laws regarding NDAs. Ensure your NDA complies with local regulations wherever it is being used. For example, California has specific restrictions on non-compete clauses that might affect your NDA’s enforceability

  • Include a compliance clause. Adding a clause that states the NDA will be interpreted according to the latest applicable laws can provide a layer of protection. For instance, “This Agreement shall be governed by and construed in accordance with the laws of [State], and the parties agree to amend this Agreement as necessary to comply with any applicable changes in the law”

  • Monitor legal developments. Subscribe to legal newsletters or join professional organizations to receive updates on legal developments affecting NDAs. For example, organizations like the American Bar Association (ABA) often provide resources and updates on relevant legal topics

#3 Customize each unilateral NDA

Customizing each NDA to fit the unique context of the relationship and the type of confidential information being protected is crucial. Here’s how you can tailor your NDA effectively:

  • Understand the nature of the relationship. Before drafting the NDA, understand the specifics of the relationship between the parties involved. For instance, an NDA for a tech consultant should include different provisions than one for a marketing consultant. This ensures that the agreement is relevant and comprehensive

  • Identify specific types of confidential information. Clearly specify the types of confidential information that need protection based on the context. For example, if you are dealing with a tech consultant, include clauses about software code, algorithms, and technical documentation. For a marketing consultant, focus on client lists, campaign strategies, and market research data. This specificity helps prevent any misunderstandings about what is considered confidential

  • Tailor clauses to the industry. Different industries have unique requirements for confidentiality. A unilateral NDA in the healthcare sector might need to address patient data and compliance with HIPAA regulations. In contrast, an NDA in the finance sector should include clauses related to financial data, investment strategies, and compliance with financial regulations

  • Include relevant use cases. Use real-world scenarios to illustrate the obligations and restrictions. For example, “The recipient must not disclose any software code provided during the consultancy period to third parties or use it for personal projects.” This makes the NDA more practical and understandable

  • Adjust the scope of obligations. Customize the recipient’s obligations to suit the specific relationship. For instance, an NDA with an external vendor might include provisions about not sharing information with any other clients, whereas an NDA with an employee might focus on not using company information for personal gain or in future employment

  • Set appropriate confidentiality periods. Depending on the type of information and the relationship, the duration of confidentiality obligations might vary. For highly sensitive tech-related projects, you might require confidentiality for an extended period, whereas for a short-term marketing project, a shorter duration might be sufficient

  • Address specific legal and compliance requirements. Ensure that the NDA includes clauses that address any specific legal or compliance requirements relevant to the industry or the nature of the confidential information. This could include data protection laws, industry-specific regulations, or internal company policies.

#4 Set clear exceptions and limitations

Including clear exceptions and limitations in your unilateral NDA is essential to define when the recipient’s disclosure of confidential information would not be considered a breach. Here’s how you can effectively incorporate these elements:

  • Define public domain information. Specify that any information which becomes public knowledge through no fault of the recipient is not considered confidential. For example, “Information that is or becomes publicly available without breach of this Agreement by the recipient is excluded from confidentiality obligations.” This ensures that the recipient is not held liable for disclosing information that is already public

  • Specify pre-existing knowledge. Clarify that information already known to the recipient before signing the NDA is not subject to confidentiality. For instance, “Information that the recipient can demonstrate was known prior to disclosure by the disclosing party is not covered under this Agreement.” This protects the recipient from being unfairly penalized for using knowledge they already possessed

  • Outline independent development. Include a clause that information independently developed by the recipient without using the confidential information provided is exempt. For example, “Information developed independently by the recipient without reference to the disclosing party’s confidential information is excluded from the NDA.” This encourages innovation and fair use of independently acquired knowledge

  • Include required disclosures by law. Specify that disclosures required by law, such as court orders or regulatory requirements, are not breaches of the NDA. State, “Disclosure of information required by law or regulation, provided that the recipient gives prompt notice to the disclosing party, is not considered a breach.” This clause ensures compliance with legal obligations while maintaining transparency between parties

  • Detail specific exclusions. Tailor the exceptions to the context of the agreement. For example, in an NDA involving a tech consultant, you might include, “Information disclosed to comply with open-source software licensing requirements is excluded.” This ensures the NDA is practical and relevant to the specific industry

  • Provide examples. Use specific examples to illustrate exceptions. For instance, “If the confidential information is disclosed in a public forum through no fault of the recipient, such as a third-party publication or media release, it is not considered a breach.” This clarity helps both parties understand the scope of the exceptions.
Also read: In-House Legal Guide to Safeguarding Company Data

#5 Specify the duration and termination conditions

Specifying the duration and termination conditions of confidentiality obligations is a critical aspect of drafting an effective unilateral NDA. Here’s how you can ensure these elements are clearly defined:

  • State the duration of confidentiality. Clearly specify how long the confidentiality obligations will last. This period should reflect the sensitivity and relevance of the information. For example, “The confidentiality obligations shall remain in effect for five years from the date of disclosure.” This sets a clear timeline for how long the recipient is bound to keep the information confidential
  • Define conditions for termination. Outline the specific conditions under which the NDA can be terminated. This might include scenarios such as mutual agreement between the parties, breach of contract, or the information becoming publicly available through lawful means. For instance, “The confidentiality obligations shall terminate if the information becomes publicly available through lawful means, without breach of this Agreement by the recipient.” This provides clarity on when the obligations no longer apply

  • Include ongoing obligations if necessary. For certain highly sensitive information, you might require ongoing confidentiality obligations that extend indefinitely. For example, “The confidentiality obligations regarding trade secrets shall remain in effect indefinitely or until such information ceases to be a trade secret.” This ensures long-term protection for particularly sensitive information

  • Use clear and unambiguous language. Avoid vague terms and ensure the language used is straightforward and easy to understand. For instance, instead of saying “the confidentiality period is reasonable,” specify exact durations, such as “The confidentiality period is ten years from the date of disclosure”

  • Provide for extensions if needed. Include provisions for extending the confidentiality period if necessary. For example, “The confidentiality obligations may be extended by written agreement of both parties.” This flexibility can be useful if the information remains sensitive beyond the initially agreed period

  • Detail the process for termination. Clearly outline the steps for terminating the NDA. For example, “Either party may terminate this Agreement by providing 30 days’ written notice to the other party, provided that such termination does not affect confidentiality obligations already in place.” This ensures a structured and predictable termination process

  • Include a survival clause. Specify that certain obligations will survive the termination of the NDA. For example, “The obligations of confidentiality shall survive the termination of this Agreement with respect to any confidential information that remains a trade secret under applicable law.” This ensures ongoing protection even after the formal end of the agreement.

#6 Use Contract Lifecycle Management (CLM) systems

Implementing Contract Lifecycle Management (CLM) systems like SpotDraft can significantly streamline the drafting, managing, and storing of NDAs. Here’s how utilizing a CLM system can enhance your NDA processes:

  • Streamline drafting. CLM systems provide templates and automated tools that simplify the creation of NDAs. SpotDraft, for example, offers customizable templates that ensure all necessary clauses are included. This not only speeds up the drafting process but also ensures consistency and compliance with legal standards

  • Centralize document management. Managing multiple NDAs can be challenging, especially as your business grows. CLM systems centralize all your agreements in one place, making it easier to organize, access, and manage them. With SpotDraft, you can store all your NDAs in a secure, searchable repository, ensuring that you can quickly find and review any document when needed

  • Automate reminders and notifications. One of the key benefits of CLM systems is the ability to automate reminders for important dates and obligations. SpotDraft can send automatic notifications for NDA renewals, terminations, and other critical deadlines. This helps ensure that you never miss a crucial date, maintaining compliance and avoiding potential breaches due to oversight

  • Enhance collaboration. CLM systems facilitate collaboration between legal teams, stakeholders, and external parties. With SpotDraft, multiple users can collaborate on drafting and reviewing NDAs in real-time, streamlining the approval process and ensuring that all relevant input is considered

  • Ensure security and confidentiality. Protecting the confidentiality of your NDAs is crucial. CLM systems like SpotDraft provide advanced security features, including encryption and access controls, to safeguard your documents. This ensures that only authorized personnel can access sensitive information, maintaining the integrity and confidentiality of your NDAs

Interested in giving SpotDraft a shot? 

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Get started with drafting unilateral NDAs

Making sure your company’s confidential information stays protected is crucial. By using the best practices highlighted in this post for writing unilateral NDAs, you can ensure your sensitive data is secure. Tailor your NDAs to fit specific needs, stay legally compliant, and make your agreements clear and enforceable. 

To get started, download our free unilateral NDA template. It’s a simple way to protect your information and keep your business secure.

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