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How NDA affects business partnerships

On Behalf of | Apr 2, 2024 | Business

Getting into a partnership is an exciting phase in a business’s growth. Businesses could achieve more together compared to when they do it alone. A partnership is a two-way relationship that entails sharing resources, networks and expertise.

In the process, you would inevitably share some sensitive information with your potential partner to drive growth to your businesses. As much as you want your business to grow, you would also want to protect your business’s competitive advantage. Having a non-disclosure agreement (NDA) could be beneficial in this situation.

NDAs safeguard sensitive information

NDAs are common in business deals and often demonstrate your seriousness when entering a partnership. An NDA, also known as a confidentiality agreement, is a legal contract designed to protect sensitive information shared between parties. It outlines the terms and conditions by which you and your potential business partner should handle confidential information. NDAs also restrict both of you to use or disclose information for reasons outside the scope of your partnership. Moreover, NDAs are not limited to business-to-business transactions; they can also be used when you disclose information to employees, clients, suppliers, contractors, advisors and other stakeholders.

Businesses usually use NDAs to protect trade secrets, inventions, financial data, customer lists and other sensitive information. A well-crafted NDA also includes remedies for breach, which may include injunctions, monetary damages or legal actions.

NDA breach could lead to disputes

A breach of an NDA could happen in the form of unauthorized disclosure of information to third parties, violation of the agreed-upon scope or use of information for personal gain. When this happens, business disputes occur, and legal action often follows. You could file a lawsuit against the breaching party, seeking financial damages related to the leaked information, their contractual obligations or intellectual property infringement.

Partnerships offer several advantages to your business’s growth and success, but they also have risks and challenges. When sensitive information is involved, ensure your NDA is clearly defined and carefully drafted before entering any kind of partnership, whether it is between businesses, employees or suppliers. A well-reviewed NDA could prevent risks of disputes and maximize the benefits of your confidential information.