Many business situations require companies to disclose sensitive information either to their own employees or to outside parties. These situations may include negotiations with a potential buyer of the business or working with a vendor or agency that will provide services to the company.

Companies may use nondisclosure agreements as a means of protecting their confidential data while still allowing information to be shared as needed. As with any contract, the details included may contribute to its ultimate validity or lack thereof.

Validity of an NDA

As explained by Forbes, one issue that may lead to potential problems with a nondisclosure agreement is the lack of clarity concerning the terms of the agreement. Another situation that may contribute to validity questions involves terms that provide one party a significantly greater level of power over the other party. Even while the contract may be designed to protect the business and its information, providing fair terms to both parties is important.

Important components of a nondisclosure agreement

When crafting a confidentiality agreement, some components to consider include the duration for which the contract will be in effect and the identification of what information shall be protected by the contract. Outlining these elements may help provide a good structure for a focused and clear contract. Also important is the identification of any agreed-upon conflict resolution paths should a disagreement later arise. Conflicts may be addressed via mediation versus litigation, for example.

More information about nondisclosure agreements and other important business contracts may be available on the confidentiality agreements page of our Texas business and contract law website.