When two businesses in California intend to work cooperatively or explore the viability of a joint venture, they generally execute non-disclosure agreements. These contracts define confidential information and how it may or may not be used and often set a time period for the restrictions. The document typically addresses the disclosure and use of confidential information separately.

The nature of the transaction determines the structure of an NDA and which entity will sign it. Sometimes only one party needs to execute an NDA because the other party will not be sharing any confidential information. If both parties will be exchanging information, then both will complete an NDA. The parties involved should strive to define confidential information very clearly, although they might need to strike a balance between narrow and broad definitions to meet individual purposes. Trade secrets should be discussed as a special and separate issue beyond confidential information.

Violating an NDA can carry costly consequences for a business, especially if a transaction takes place between competitors. For example, a case that involved two airlines resulted in an award of $80,000,000 after a court ruled that one airline had misused information from the other airline to its advantage.

A person responsible for drafting or signing an NDA could seek legal advice from an attorney familiar with business formation and planning. When an agreement needs to be written, a lawyer could determine how to best define the client’s confidential information and establish terms that protect the company’s interests. When someone is presented with an NDA to sign, an attorney could study the document and inform the person about its restrictions and how to comply with the terms. When necessary, a lawyer may engage the other party in negotiations to adjust the terms so that they reflect the client’s needs.