How To Create and Automate Non-Disclosure Agreements (NDAs)

Topics: Workflow Automation, NDA, Non-Disclosure Agreement, Contract Creation

Written by Lindsey Paulk

NDAs are some of the most commonly created business contracts. Building them from scratch every time results in wasted time and increased bottlenecks for your legal department. Today, we’ll discuss how you can efficiently create and automate your NDAs.

Everything you need to know about non-disclosure agreements.

The Definition of a Non-Disclosure Agreement (NDA)

Non-disclosure agreements exist to protect businesses, supporting them in keeping sensitive data confidential by clearly defining which information is to be kept private within a business partnership. In addition, these agreements detail which information can be disclosed and to which parties. Parties will define which data they will share while keeping the data from being disclosed to third parties. In this manner, NDAs provide protection of sensitive company data and proprietary information. For example, you might consider concepts like trade secrets and commercial terms. Bearing this in mind, non-disclosure agreements are commonly referred to as confidentiality agreements.

Non-disclosure agreements essentially provide a guarantee that confidential information can be shared between parties securely in a legally protected environment. Drafting and reviewing non-disclosure agreements at scale can prove to be complex for the modern-day growing business and their legal department.

When To Use a Non-Disclosure Agreement

The most common scenarios where a non-disclosure agreement is implemented include the following:

  1. Hiring new employees

New employees will need access to sensitive company data like proprietary and confidential information in order to carry out their responsibilities. When new staff is hired, you can ensure that any shared company information remains confidential by requesting each new hire to sign an NDA prior to their start date.

  1. Developing a new business partnership

With any effective business relationship, you will be required to share sensitive business information with your business partner(s). Within your non-disclosure agreement, you’ll likely discuss confidential data pertaining to new products and business ideas. To mitigate the likelihood of your partner claiming a company idea as their own, NDAs can be leveraged to keep your ideas more secure.

  1. Onboarding new clients

When you start a new working relationship with a given client, then you might share confidential information with them. This may include new ideas for products and trade secrets. To keep your private information private, it’s necessary to take recommended precautions by requesting they sign a non-disclosure agreement.

  1. Requesting financial backing for new business ideas

In the case that your organization is seeking some financial support from an investor, you’ll need to be as honest and transparent as possible regarding your organization’s current financial status, product, and business methodology. In this manner, enacting a non-disclosure agreement can support you in protecting your private business information after sharing it with the investor.

  1. Conducting business with service providers

During business, you might work with service providers who may request access to your confidential business information in order for them to effectively complete their service. In this manner, the service produce might also work for several companies with similar business models and objectives as yours, so it’s crucial that you keep your confidential company information secure with a non-disclosure agreement.

Information To Include in a Non-Disclosure Agreement

Non-disclosure agreements should include particulars that are relevant to your unique business needs and objectives. It’s important to note that there are a few types of information that will likely require a bit more protection. These common types of information protected by NDAs include the following:

  • client lists
  • manufacturing procedures
  • technical information
  • business ideas
  • blueprints
  • designs
  • business development strategies
  • business partnerships
  • financial data

The Legally Binding Nature of Non-Disclosure Agreements

Non-disclosure agreements are legally enforceable contracts. However, there are a few scenarios where confidentiality clauses will fail to hold up in a court of law. For example, if a confidentiality clause is employed in an effort to hinder whistleblowers and publicizing illegal business practices, then the clause will not be considered legally binding. In addition, the confidentiality clause will not stand legally if the signer did not have sufficient time to consider the clause’s implications prior to signing.

How To Create a Non-Disclosure Agreement

Building your non-disclosure agreements efficiently and accurately is critical for any scaling business on the fast track to success. If you’re struggling to decide which information is most important to include within the document or if your having trouble getting started, then your NDAs can become a barrier to growth. In this blog, we hope you gain some clarity on exactly how to draft these agreements.

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Key Elements of a Non-Disclosure Agreement

To build an extensive non-disclosure agreement that will hold up in court, we suggest you learn about the following elements that are essential to any NDA capable of protecting your company’s private information.

Take a look at the following key elements of an NDA:

#1: Party details

An NDA must include the details and basic information of all involved parties and individuals covered by the agreement.

#2: Definition of which information is confidential

It’s necessary to create clear expectations of which information must remain confidential, clearly defining what confidentiality means in the context of the given agreement. This will likely vary between cases; however, each NDA will require a clear definition of which data and material are considered confidential. In addition, you will need to cover if written materials, files, and verbal conversations are included within the realm of confidentiality. It should also be clearly discussed which information is not considered confidential.

#3: Confidentiality terms

In the case of any contract, an NDA will clearly describe the duration of the agreement at hand (i.e., three years, six months, or even an indefinite term).

#4: Exclusions

NDAs will often express exclusions to the clause of confidentiality. In the case that the data is public knowledge, it is excluded. Exclusion clauses describe to which parties that the recipient of the NDA can disclose information with without breaching the NDA.

#5: Obligations to disclose information

An NDA is created to protect against private information from being shared. However, there are a couple circumstances where disclosure of information is inevitable. In the case that disclosure is required in legal proceedings, contractual parties are legally obligated to disclose data. This must be set out clearly within the NDA to all parties.

#6: Consequences for a breach of confidentiality

A breach of confidentiality can result in various repercussions, which are clearly laid out within the NDA itself. The NDA should also include how to resolve the breach for the injured party.

#7: Jurisdiction information

Your NDA should include which jurisdiction the agreement is governed under in the case that a breach of confidentiality occurs.

#8: Supporting clauses

Every NDA has a unique context, and according to the scope of the agreement, the NDA might benefit from the inclusion of additional clauses (i.e., severability).

Why Manual NDA Creation Is Outdated

Building your NDAs from scratch can be incredibly time-consuming.

Here’s what the manual process of creating a non-disclosure agreement typically looks like. Bear in mind it will seem like a very complex process of unnecessary steps:

Oftentimes, creating an NDA involves someone in business requesting an NDA from your legal department. Legal, more than likely is drowning in heaps of other higher-level projects, so they might suggest that the requester locates the NDA on their own within the company’s shared drive. Then, they might locate an NDA template (that may or may not be up to date), populate the data fields with necessary information, and then forward the completed template to the legal department for their review. Legal will then review, correct, and then send the document back to the user.

The user who’d originally requested the NDA from legal then sends the document to the counterparty. The counterparty might comment on the contract within Microsoft Word, and then they’ll email it back. In the case that there’s still some disagreement regarding the terms, then the parties will use in-document redlining materials to mark up the agreement, sharing it back and forth. In this case, they’ll usually save and share a new document version every time. In due time, an agreement is found between both parties, resulting in the signature of each party. Following contract signature and execution, the NDA is sent (typically via email) to the appropriate stakeholders and saved.

6 Reasons to Ditch Manual NDA Creation

Creating an NDA from scratch takes an exorbitant amount of time and unnecessary steps that result in heightened risk. Let’s take a look at some of the main reasons why you should get rid of your manual approach to drafting non-disclosure agreements:

  1. Low quality work

You’ll find your team spending unnecessary time describing to their coworkers how and where to locate the same documents in shared drives on a routine basis.

  1. Risks in version control

By manually building your NDAs, your team will edit, save, and send numerous versions of the same document over and over. This can result in the wrong NDA being sent and a past template being used.

  1. Using the wrong template

Is your team using the correct NDA template? Is a mutual or unilateral NDA template needed in the case at hand?

  1. Lack of professionalism

Manual NDA creation can result in discrepancies between your different NDAs. If your NDAs are not standardized, it can damage your organization’s reputation.

  1. Increase in bottlenecks

NDAs are time-consumptive when they’re created manually each time. They can get lost in translation between multiple people as they’re created, increasing risk.

  1. Missing metadata

Manual NDA drafting reduces transparency and visibility. You’ll likely lose track of your NDAs after they are signed.

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Why Contract Automation is the Way to Go For Your NDAs

Today, growing businesses and organizations are recognizing the utility of automation for their common contract types, one such being non-disclosure agreements. Transitioning your non-disclosure agreements to a contract automation solution can support you in saving time, cutting costs, and freeing up your legal team from low-value tasks.

How to Create NDAs Rapidly With Templates

  1. Create an NDA template

The majority of businesses will have a legal team that wishes to maintain oversight over what is included with their company’s NDAs as well as how these agreements are employed. In custom, flexible automated contract workflows, in-house legal counsel can create specified NDA terms, allowing other departments to create contracts from templates without hindering approved contract language within the confidentiality agreement.

  1. Build the NDA from automated, self-serving templates

You can self-service your NDAs from templates to save your team time and support your employees in working independently. More than likely, your sales department will send the NDA to prospective clients. HR will often automate NDAs, sending them to new hires. With self-serving contract automation, all of these processes become standardized and far more efficient.

Flexible, automated contract workflows allow parties to use question and answer flows on their NDA templates to easily fill-in data smartfields. The metadata is populated into the contract, allowing the NDA to be searchable.

In your organization, it’s crucial that you define which individuals are given permission to create NDAs and to which departments they can be shared with.

  1. Approve the NDA

NDAs can be used in a wide variety of situations, and they’re pretty low in risk in comparison with several other contract types. However, it’s essential that legal can maintain adequate control of contract terms. By configuring an approval workflow in your contract management system’s automation platform, your legal department can seamlessly review every contract prior to sending them.

  1. Sign NDAs with Electronic Signatures

E-signature integrations have revolutionized modern day contract lifecycle management by increasing the speed and security of contract signing and execution. With the e-signature, each party can securely sign the non-disclosure agreement on their mobile device at any time, any place.

  1. Leverage an all-in-one contract management system

We highly suggest transitioning to a comprehensive contract lifecycle management system to take care of all of your contract types. Far too many organizations leverage subpar contract management processes to create and locate their company NDAs. Gone are the days of manual contract reviews, negotiations via email, and disjointed contract storage. All of these manual methods are not only outdated and time-consuming, but they’re inherently prone to human error. With a contract management system, you can manage contract template creation and storage while standardizing your contract building, signing, approvals, and negotiations.

  1. Ongoing management of NDAs

Outdated, manual contract management means that your signed NDAs are stored in physical storage in filing cabinets or across the organization in shared drives. A manual approach often means many additional files, resulting in an increased likelihood of misplacement and loss of your NDAs. With a secure, collaboration-friendly platform for your contracts, you can work cohesively in a dynamic environment that supports risk management and ensures that all metadata contained in your NDAs are searchable. This means version control will no longer be a persistent roadblock.

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Highlighted Contract Management System Features That Support Your NDAs

By automating your NDAs with Dock, you can employ several features to streamline your NDA workflows for all parties:

  • Self-servicing contracts: question and answer flows build efficiency in contract creation from preapproved templates, allowing users to create accurate, compliant contracts within minutes without requesting assistance from legal
  • Flexible approval workflows: legal approvals are key to confirming that each NDA is able to be shared between involved stakeholders
  • In-document commenting: with various terms, it’s key that stakeholders have the ability to collaborate on documents at all times without stressing about versioning and audit trails
  • Redlining: when negotiation occurs, then it’s helpful for counterparties to have redlining capabilities within the contract management platform that will not influence the data or audit trails
  • Electronic signature: NDAs are one of the most common legal agreements managed, meaning that the high volume of these contracts creates the need for an optimized contract lifecycle workflow

The Advantages of Automating Your NDAs From Templates

When you begin automating your non-disclosure agreements with automated workflows and preapproved contract templates, you’ll experience several benefits right away. These noticeable benefits include the following:

  • The right NDA template is always used: when a team creates an NDA from a preapproved contract template built by the legal department, they ensure that the correct version is used.
  • The NDA is agreed at a faster rate: NDAs aren’t often negotiated, meaning there shouldn’t be a reason for NDAs to take an extensive amount of time to agree. And with automation, the majority of the bottlenecks associated with NDA creation and ongoing management are eliminated.
  • Legal has more time on their hands: you reduce the need for legal to take a look at your NDAs, meaning they can get back to doing the higher-value work that they went to school for!
  • Save time: you’ll notice that automating your NDAs results in an extraordinary amount of time saved.

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Conclusion

If you’re ready to take your non-disclosure agreements to the next level by standardizing them with preapproved contract templates and automation capabilities, then look no further than the Dock 365 Contract Management System to support you.

Out contract solution is built on your Office 365 infrastructure and SharePoint for maximized cost-efficiency, user-friendliness, and collaborative capabilities. Our comprehensive, end-to-end approach to the contract lifecycle will ensure that nothing slips between the cracks for your organization. Manage contract more productively than ever this year with Dock 365.

Learn more about our Dock 365 Contract Management System here.

Learn more about Contract Lifecyle Management (CLM) Software here.

For more information, we would like to welcome you to schedule a free demo with us today.

 

 

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