Definition of Non-Disclosure Agreement

What is a "non-disclosure agreement"? What is the definition of the term NDA, or "Non-Disclosure Agreement"?

A non-disclosure agreement, or confidentiality agreement as it is also known, is a contract between two parties in which it is agreed that certain sensitive information will not be disclosed to other parties.

Let's give you a couple of examples of a NDA (or non-disclosure agreement) so that you can see what I am talking about:

Example #1. I am starting a new website and don't want my business plan to be disclosed to the public, as I am worried about competitors swooping in and starting something similar before I even get the site off of the ground. I am looking to hire somebody to help program the site. I ask the people that I hire to sign a non-disclosure agreement while they are working on the site. By signing this agreement, they are agreeing that they will not speak of my site to any third parties.

Example #2. XYZ is interested in acquiring ABC. XYZ needs to go through ABC's books in order to try to figure out an acquisition price. ABC will obviously want to protect themselves through this process, in order to prevent competing companies from swooping in and obtaining sensitive information about ABC under the guise of wanting to acquire them. ABC will protect themselves by having XYZ sign a non-disclosure agreement prior to negotiations taking place.

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