Non-Disclosure Agreement Warning!

It seems as though it has gotten to be that every time you go to a business meeting someone wants to whip out a Non Disclosure Agreement (NDA), and ask you to sign it. Don’t! Having said that we know that from a practical standpoint there will be times where you will sign an NDA in order to move forward in a potential joint venture or other type of transaction. If you find yourself faced with that uncomfortable position, at least take the time to read the NDA you are presented before you sign it, because not all NDA’s are alike. Just for fun I started collecting and comparing different ones people gave out and was amazed by some of the differences.

One of the most far-reaching NDA’s is the one that contains a non- compete clause. Amazingly, this is getting more frequent because people are using other people’s forms that contain the non-compete language and once it gets into circulation it is harder to stop. At a minimum, you want to strike the Non-compete part of the NDA. It is one thing to agree not to disclose information you are getting that you have no prior knowledge about, but it is quite another for the other party to try and stop you from competing with them if negotiations don’t run well. In most cases you wouldn’t sign a non- compete without very careful negotiations on language about territory and duration…yet in a weak moment you might sign away your ability to compete just because someone hands you what looks like a “standard” NDA. In fact, make it a point that anytime someone hands you a document and says, “its ok its just a standard NDA” (or another type of contract for that matter) make it a point to put yourself on red alert. The issue is always “whose standard” (likely theirs) and that’s the problem.

Before you sign anyone’s NDA, make sure you review it carefully to make sure the only thing you are agreeing to is not to “reveal the information you are about to receive to others if you did not already have that information or that it was otherwise not available from another source”. This normally is said in about three paragraphs instead of one short sentence, but that is the essence of all someone should need from you. If you give the opposing party more rights than that, you could have a problem if you decide to do a separate business deal with someone else in a business that is even similar to the company that you signed the NDA with. Another option you can exercise when someone offers you an NDA is to just take the position that you don’t sign NDAs. This is easier to do if you are the have the upper hand in a negotiation and you have lots of people wanting to work with you, but several of our clients have taken this position and don’t budge. You might miss seeing some new and exciting stuff if you take this position, or the other side may just decide not to force you to sign after all. Naturally, you could always change your mind if they tell you they won’t move forward without it. Some people think it is weak to change your mind when you are negotiating but we choose to believe it is just part of the process and you haven’t given up anything at all.

Naturally, we would be remiss as lawyers if we didn’t say, “But On the other hand” (as lawyers always do), and say to you that when the tables are reversed and you are the one handing out the NDA for others to sign, make it as strong as you can. In some cases you may want to have non-compete language and even a non-disparagement provision so people don’t bad mouth you. Getting beat up on the internet by people saying bad and untrue things about you is a problem these days because some of the comments last forever on the web and hurt you with potential new business. You can start with NDAs, but be sure to keep the non-disparagement provision in mind whenever you are drafting any agreement,. What we have tried to do in this article is raise the issues and concerns about NDAs. Spend a few moments thinking about them and plan mentally what you are going to do the next time someone hands you one and asks you to sign it. Planning ahead mentally will keep you from being caught off guard. Now that you know what to expect you can react according to your own advantage and not someone else’s.

 
 

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