Business owners want to keep their recipe for success a secret. But many know they must share information with third parties to continue growth and maintain a healthy bottom line. Because of this, many enter nondisclosure agreements with third parties they work with. These contracts can help businesses protect their most valuable data and make sure others don’t use it to their advantage.
However, businesses should make sure their NDAs are enforceable and list specific penalties if parties violate its provisions.
It’s crucial to avoid broad or outdated terms
Some business owners may provide blanket statements, saying all of their information is confidential. However, doing so can be risky, as not being specific can make the contract much harder to enforce. On top of that, it’s also tricky to keep terms relevant. In today’s fast-paced marketplace, confidential information can lose value over time. Even then, third parties could still try and use it to their advantage.
How do I know if my NDA is enforceable?
Business owners may want to ask themselves the following questions:
- Is the correct party listed in the agreement?
- Are the terms and provisions listed in my agreement specific but reasonable?
- Does the third party already know the information I want to keep secret?
- Was the NDA drafted and signed by someone with authority?
Having a sound agreement makes claiming penalties easier
The last thing many business owners want is for someone to release their confidential information. That’s because it can have a substantial impact on their company’s bottom line. However, by having the right provisions in place, it can make it easier to get compensation from the violating party.