In 1735, Benjamin Franklin famously claimed that three people could only keep a secret if two of them were dead.
In 2021, I think we can all safely assume that Mister Franklin had never heard of a non-disclosure agreement.
Fortunately for you (not to mention the other two in your trio), that’s what this post is all about. To help you keep your secrets and further dissuade anyone from taking the proverbs of the patron saint of advertising too literally, we’re breaking down the basics of a typical NDA contract.
Before we dig into the nitty-gritty of NDA contracts, take a moment to download our free non-disclosure agreement template here or below.
Non-Disclosure Agreement Template
Download NowNow, with our non-disclosure agreement template in hand, let’s dive into some NDA contract fundamentals.
First thing’s first:
An NDA agreement is a contract that legally prohibits its' signatory (the individual who signed it) from sharing information or materials that have been deemed confidential by their opposite party, the owner, or manager of said confidential materials.
In other words, an NDA agreement prevents someone from telling secrets by creating serious legal consequences for doing so.
If only someone had told Benjamin Franklin…
But, in all seriousness, we can’t blame Ben. No one knows who first thought up the modern NDA contract or exactly when it first came into use, but we do know that its rise to prominence didn’t begin until sometime in the 1940’s, a relatively late start compared to most common legal documents and long after Mister Franklin took his own secrets to the grave.
Today, however, non-disclosure agreements are ubiquitous. The NDA contract, in some form or another, is considered standard paperwork for most industries in the modern market.
Now for the fun part.
An NDA for employees working on the production of a movie, television show, or commercial might have unique concerns, but the basic rationale behind its existence remains the same.
An NDA contract is just that: a contract. As such, the details of any non-disclosure form can vary wildly according to the specific needs of the parties involved.
However, while the exact non-disclosure agreement wording may differ from document to document, there are some basic do’s, don’ts, and maybe-you-should-think-abouts that will remain the same, at least in principle.
Let’s start with what you need:
The order of what’s inside an NDA will fluctuate. Let’s run down the absolute essentials for any NDA agreement.
Any free non-disclosure agreement template should kick things off with a brief identification of the individuals or business entities involved. (If yours doesn’t, again, definitely give our free NDA agreement pdf a shot here.)
It may seem obvious but defining exactly who is transacting the confidential information and who is restricted from further transacting confidential information is a critical component of the NDA’s legality. Typically, the party revealing information is referred to as the “disclosing party”, while the party receiving that information is referred to simply as the “recipient”.
In some cases, there may be three or more parties involved in the agreement. The recipient, for example, may need to share the information with a business partner or other entity in order to complete the larger job for which they’ve been hired. In such instances, the non-disclosure agreement must also identify those additional parties and define their role in the transaction as explicitly as possible.
The definition of confidential information defines exactly what “confidential information” means in the context of each specific NDA contract. This particular slice of non-disclosure agreement wording generally occurs right after the identification of parties involved and right before the specific terms of the contract are laid out.
The nature of the confidential information needs to be defined so that everyone involved in the transaction clearly understands what the non-disclosure agreement does and does not cover.
It’s in the best interest of the disclosing party for this definition to be as broad as possible in order to prevent the exploitation of any loopholes. However, there’s a fine line between broad and vague. It’s equally important that the recipient of any confidential information can easily identify what they can and cannot use as they go about their business.
The whole point of any non-disclosure agreement is to establish an obligation on the part of the document’s signatory to keep secret the confidential information given to them and to refrain from using it for personal means. With that in mind, in order for the contract to be valid, the signatory must understand, as clearly as possible, what they are obliged to do or not do with the confidential information that they’re given; they must understand the scope of their obligation under the non-disclosure agreement’s terms.
In other words, an NDA agreement needs to say exactly what the recipient of the confidential information both has to do and has to NOT do, at least as far as confidentiality is concerned.
As is the case with the definition of confidential information, the scope of the confidentiality obligation is often broadly defined. Disclosing parties will often try to cover as many bases as possible within the language of their NDA in order to make any violation of the NDA contract crystal clear and, therefore, optimally enforceable in a court of law.
Any non-disclosure agreement should define exactly how long the period of confidentiality will last.
The most ironclad NDA contract term length is “indefinite”, meaning that its signatory’s lips are effectively sealed from the moment of signing until the end of time. However, for obvious reasons, this length is rarely deemed reasonable, and compromises on term length are often made.
It’s not uncommon for non-disclosure agreements in traditional business environments to last anywhere from two to five years, but the world of film production runs very much on its own NDA clock.
In general, the moment that any film or television show is made public, the terms of any non-disclosure agreements restricting its crew members are null, as any confidential information they may have formerly known is now accessible to anyone. However, to ensure greater legal leeway, production companies will frequently set NDA term lengths of much longer periods of time. This is particularly true in the world of commercials, where film crew members often come into casual contact with carefully planned products and long-term ad campaign strategies.
Question: What is a contract without a signature?
Answer: Not a contract.
Without a dated signature, your NDA is little more than a non-disclosure agreement template. The signature line is the most generic and most important element of any NDA agreement.
Aside from the absolute necessities, non-disclosure agreements are flexible documents that can be altered to meet a wide range of user needs. Let’s look at just a few concepts that might pop up in your next NDA:
Many non-disclosure agreements contain exclusions from the confidentiality obligation of the recipient party. These exclusions make allowances for specific situations in which it would be unreasonably difficult or otherwise unfair to expect the recipient to keep the provided information confidential.
Some common exclusions make exceptions for information that is already known to the public, information that is independently developed by the recipient without use of the disclosing party’s confidential materials, and information that is given to the recipient by a third party that’s under no obligation to the disclosing party.
The most important exclusions, however, are arguably those that describe a process by which a recipient can responsibly divulge confidential information through a legal process. It’s possible that a court may compel an individual to divulge confidential information, and exclusions covering that possibility enable the recipient to do so in a manner respectful of both parties, generally by stipulating that the disclosing party be notified in advance of their confidential information’s release.
NDA contracts will often include clauses that guarantee, deny, or specify certain legal details. Such clauses might address procedural questions, like jurisdiction or methods of recourse in the event that a violation of the NDA agreement occurs. Alternatively, they may stipulate what rights the recipient has to the confidential information itself.
In still other instances, you might encounter hiring clauses that bar the recipient from hiring away any of the disclosing party’s employees or from being hired themselves by a competitor of the disclosing party for a specified period of time.
Versions of the clauses mentioned here are common, but it would be a mistake to assume this brief list is exhaustive. The fact of the matter is that the clauses within a non-disclosure agreement can be modified to address nearly any situation, provided that it’s done within legal bounds.
Before we move on, let’s take a quick look at a few red flags. Here are a few things you never, ever want to include in a non-disclosure agreement.
If you encounter non-disclosure agreement wording that seems to make two opposite stipulations, do not sign. Simple as that. It’s a good idea to avoid contradicting clauses in any contract, period, but an NDA contract with such language can land all parties involved in a muddy legal situation.
Pay particular attention to clauses that describe how or when confidential information should or should not be shared. If you represent the disclosing party in an NDA contract gone wrong, you may have accidentally created a legally unenforceable loophole through which you’ll be taken advantage of.
If you represent the recipient party in the same exact circumstances, one wrong twist of fate could land you right between a rock, a hard place, and a well-funded team of lawyers with nothing to do but their job (i.e., suing your pants off).
This should go without saying, but the last thing you want to include in a non-disclosure agreement is the confidential information itself. Of course, the NDA needs to define the confidential information it covers, but- as with Mister Franklin’s words- it would be a mistake to think too literally on the subject.
To clarify, you don’t want to share your secrets in the document that’s meant to prevent people from sharing your secrets.
Now that we have a clear idea of what non-disclosure agreements are, let’s zoom back out and get a glimpse of how they function in the big picture.
Short answer? Yes. Absolutely.
Well, in theory, anyway. NDA agreements are just like any other contract, and contract law can get pretty complicated in practice. If the terms of a non-disclosure agreement are clearly defined, then it should be clearly enforceable. However, if an NDA contains a gray area and a violation occurs within it, legal enforcement is not guaranteed.
A similar hitch can rightfully occur when a non-disclosure agreement breaks ethical boundaries. If the enforcement of an NDA contract would violate public policy even tangentially (as in the case of an NDA being used to hide information related to a crime), then it’s much less likely that it would hold up in court.
However, the legal system is not perfect, and hot debate still swirls around the potential for NDAs to be used as malicious scare tactics.
If the recipient party of a non-disclosure agreement is found to be in violation of the NDA contract, the disclosing party may have access to several methods of recourse. Most prominently, the disclosing party will likely have the right to sue. Exact damages can be difficult to calculate, but most non-disclosure agreements include a cause that specifically entitles the disclosing party to equitable monetary relief in the case of a breach.
Beyond direct financial consequences, the disclosing party may also have the right to force their recipient party into ceasing relevant business activities. It seems like a less immediately intimidating action, but it may make an equally devastating impact on the recipient’s financial well-being in the long run.
A non-disclosure agreement can afford valuable protection anytime that you want to communicate crucial business information but need to make sure that that information is not stolen or inappropriately used by the other party.
NDAs are ubiquitous today precisely because there are so many potential situations that fit that bill.
On one end of the spectrum, you might need a non-disclosure agreement in the high-stakes situation of pitching a brand-new technology to potential business partners or investors. On the opposite end of the spectrum, you might need an NDA agreement in the much more benign situation of temporarily hiring a contractor accountant who will have access to critical financial information.
In either situation, the non-disclosure agreement guarantees at least some protection in circumstances that would otherwise force the disclosing party into an exposed and vulnerable position.
Production companies big and small typically have a go-to non-disclosure agreement template on standby, but it’s important that they review that template regularly to ensure it makes sense for each new project.
This is particularly true if a producer or their company frequently jumps between different types of production. It’s unlikely that the NDA contract you used on that insurance commercial is perfectly compatible with your upcoming documentary on the Newton of Electricity.
Don’t be like Ben. Next time you need to share confidential information, be sure to protect yourself with a non-disclosure agreement. And if you’re not sure exactly what you need from your NDA, consider picking the brain of a qualified entertainment lawyer.
In the meantime, discover a digital startwork solution to store all of your essential paperwork, including our free NDA agreement pdf.
