Use our Mutual NDA to protect both your confidential information and the other party’s.
Updated May 25, 2024
Written by Josh Sainsbury | Reviewed by Brooke Davis
A mutual non-disclosure agreement is a legally binding contract between two (or more) parties where both parties agree not to disclose or share proprietary information they reveal to each other.
This is a standard agreement when businesses or individuals explore a potential relationship or partnership and need to share sensitive information.
A mutual non-disclosure agreement ( also known as a bilateral ) is a contract that requires two or more parties to maintain confidentiality regarding specific information they share, preventing either party from disclosing, reproducing, or misusing the confidential information.
For example, two separate companies may consider working together on a joint project. To thoroughly discuss the opportunity, both parties may need to disclose confidential information they do not wish to be made public.
They may also need to disclose confidential information that a competitor could use to their advantage in the marketplace. In this case, this agreement would protect both parties from leaking critical proprietary information.
A mutual non-disclosure agreement is not legally required to be notarized or witnessed.
The main difference is that in a mutual NDA, both parties agree not to disclose proprietary or confidential information about the other party’s interests. In contrast, in a unilateral ( one-way ) nondisclosure, only one party is bound to keep the shared information confidential.
It’s drawn up to protect the company’s information, with the recipient agreeing not to disclose information. In these agreements, the company isn’t making any promises of non-disclosure – mainly because the receiving party has no critical information they’re disclosing.
This type of agreement is often used when two parties discuss working together in some capacity.
For example, the companies might hope to collaborate on a new project or merge some area of their businesses.
These non-disclosure agreements are also commonly used when startup businesses are seeking investors. To cure investment, a startup must disclose sensitive information about its project, products, company financials, etc., to attract serious investors.
Interested parties, like larger businesses or other private investors, often need to share information with the startup to reach an agreement. A mutual NDA protects both entities.
This contract should be drawn up while both parties are still vetting the partnership but before internal information has been shared. The collaboration will often require at least one entity to disclose private information.
Deciding to move forward with business dealings often requires one or both parties to have access to confidential information about the other business.
Each business relationship differs. A unilateral NDA may be sufficient.
t. In other cases, both parties will be divulging proprietary or sensitive data, so a mutual confidentiality agreement protects both parties more effectively.
When the business relationship evolves, and both parties need non-disclosure protection, it’s advisable to draw up and re-sign using a mutual non-disclosure agreement. Some companies immediately use this agreement, even though only one party shares sensitive information, to avoid drafting and re-signing multiple contracts.
This way, they protect their company from sharing critical information, and the other entity should the partnership evolve.
This step ensures that the companies won’t need to draw up further agreements later or risk wasting time protecting both entities’ interests.
Mutual NDAs are legally binding contracts, and their enforceability depends on several factors:
In case of a breach of the mutual non-disclosure agreement, the non-breaching party may seek various remedies, including:
The biggest worry about not having one is that your sensitive information is not protected. Without this document, you have limited recourse if the other party makes sensitive information public or damages your business interests due to access to this confidential information.
Here are a few potential negative consequences:
