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Unilateral non-disclosure agreement, a simple explanation.

June 12, 2021

In order to understand how a unilateral non-disclosure agreement works, let’s first understand a simple non-disclosure agreement. 

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What is a non-disclosure agreement?

A non-disclosure agreement is a mutual agreement between the parties that contains sensitive and confidential information. In case one party neglects and violates the terms of the agreement and lets out confidential information, then legal action can be taken against them. It is also commonly referred to as an NDA or a confidential agreement (CA). 

A non-disclosure agreement can be broadly classified into the following types:

Unilateral non-disclosure agreement

 This is a type of NDA that works one way. In this type of agreement, the ownership of the confidential information lies with just one party. The other parties are obligated to respect the terms of the agreement or else legal action may be taken against them. 

Mutual agreement

In this type of non-disclosure agreement, all parties have ownership of the information and terms of it. It needs to be signed by all parties included. This kind of agreement is usually for individuals or firms of a business/company. 

This blog shall discuss and focus on the meaning of a unilateral non-disclosure agreement and provide a better understanding of it. 

What is a unilateral non-disclosure agreement?

A unilateral NDA is an agreement between two parties in which confidential information is disclosed by the disclosing party to the receiving party. The receiving party is obligated to respect the terms of the NDA. This legally bound contract is protected under the Indian Contract Act, 1872. It is also called a one-way agreement since only one of the parties has ownership of it, though both parties have to agree to the terms of it. This legal agreement may contain information such as a business plan, financial documents, etc. 

A unilateral non-disclosure agreement is only concerned with safeguarding the interests of a firm by ensuring loyal behavior from the other party. In case of violation of the terms of the agreement, legal actions may be taken which are mentioned in the agreement and mutually agreed upon. The document may also mention a timeline stating the time period for which the agreement shall be valid and a set of consequences upon breaching. 

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Why is unilateral NDA important?

A unilateral NDA is important due to the following reasons:

  • It helps companies create a functional relationship with other entities by ensuring trust and loyalty
    The document, by mutual agreement of the disclosing party and receiving party guarantees the protection of the confidential agreement. 
  • Since it is a legal document signed beforehand, it helps resolve any future conflicts
    The document discusses the plan of action in a certain situation beforehand, hence causing less confusion in the future and helps in resolving the issue. 
  • It safeguards the interests of a company hence allowing it to function smoothly
    The agreement demands the protection of confidential information that in case leaked from the organization may cause damage. Hence these legally outlined documents protect the interests of the firm hence allowing smooth sailing. 

How is unilateral NDA different from mutual NDA?

Unilateral and mutual NDA are the two main types of non-disclosure agreements.

While unilateral is a one-way agreement with the ownership of the information with only one party, mutual agreement is the one in which both parties have ownership and are also protecting the information for each other that may also pose a threat to each other.

A unilateral non-disclosure agreement may be significant to entrepreneurs who run a business and need to hire employees who will keep sensitive information to themselves. A working relationship between an employee and an employer invites a unilateral NDA since the relationship works one way.

However, on the other hand, a mutual NDA  is significant for companies in partnership and collaborating. In this situation, both companies are exposing sensitive information to each other such as financial statements and commercial and trade secrets. Hence this mutually discussed agreement allows them to trust each other and create a healthy working relationship.  

Hence, if an entity is in a situation where the protection of information is only required by one party, it is a unilateral NDA. However, if two parties mutually decide upon sharing and protecting each other’s information it is like the name suggests a Mutual NDA. 

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NDA is a document outlined by law allowing two or more entities to be in an agreement that allows them to trust each other and share sensitive information. In case the terms of the agreement are violated, there are consequences to it legal actions may be taken.

An NDA can broadly be classified into two types, namely, unilateral NDA and mutual NDA.

Unilateral NDA is also called a one-way agreement since only one side has ownership of the information while the other is just obligated to follow the terms of it and not violate it. While a mutual NDA is the one that is more significant for collaborators who in order to work together have to share confidential information with each other. 

A unilateral NDA provides clarity on the terms and conditions that the receiving party must follow. For example the relation between an employee and employer.
A unilateral NDA plays an important role in any successful working relationship between two entities in a business. 

About Author

Bani is a student at Strawberry Fields High School and a legal content expert at eSahayak.

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