How to review a Non-Disclosure-Agreement

A step by step guide on how to check an NDA

This article will provide you with a guideline on how to review a non-disclosure agreement (NDA).

📃 NDA contracts are often the first step of any commercial engagement. They set out how confidential information will be protected.

A breach of an NDA can significantly harm, or even end a business 😱. It is important you understand if you are properly covered.

NDAs can be confusing

They can be difficult to understand, look intimidating and are often written in “legalise”.

But don’t worry, if you understand what to look for it can be easy to avoid major issues.

Here’s how step-by-step:

Step 1: Check the signing parties

The NDA will only bind those Parties identified.

Perform a know-your-customer (KYC) on the signing entity and verify that the signatory has power of attorney.

Then, check that all the other involved parties are properly captured including Affiliates, Subcontractors, Consultants and anyone else engaged in the deal.

Step 2: Check the “Purpose” of the NDA

The NDA needs to properly describe the nature of the deal and the scope of confidential information which is covered.

If the Purpose is “an equipment sale in the Asia region”, be careful if you end up discussing Europe or services, the NDA would not cover that. Generally, it is safer to make the purpose a broad as possible.

Step 3: Define the limits of liability and consequences of a breach.

Ensure that the limits and consequences are sufficiently high to cover a breach event.

If you are doing a deal for $100,000, limiting the NDA consequences to $1000 would mean that you are not sufficiently protected.

⛔ Most breaches of confidential information lead to consequential damages so double check if these are limited or excluded, this might not be to your benefit.

Step 4: Check what information is considered confidential

Validate the definition of Confidential Information covers all types of information that will be shared, including e-mail, images. Even verbal communication or meeting minutes can be considered confidential.

Finally, check the term

Almost there, just check that the duration (or term) of the NDA is long enough to protect you even in case of a delay in the deal.

Last but not least, grab an example NDA from a prior deal or get an example to compare all the standard language.

Remember contracts are written so that someone else can read the document and understand the intention of the parties. Writing clarity and accuracy are critical, if you don’t understand it then insist on clarifying the language.