Ever encountered the term “Non-Disclosure Agreements?” Perhaps you’re wondering when you can use them for your business or what are the different types of Non-Disclosure Agreements.
In this article, we’ll discuss the two specific types of non-disclosure agreements: Mutual Non-Disclosure Agreement and Unilateral Non-Disclosure Agreement. I’ll be giving some examples to help you better understand the difference between these two types. Moreover, you’ll discover the distinction between a non-disclosure agreement and a non-disparagement clause.
Thrilled to know all this information? Let’s dive into the topic right now.
Mutual Non-Disclosure vs. Unilateral Non-Disclosure
You might be asking, “what’s the difference between Mutual Non-Disclosure Agreement and Unilateral Non-Disclosure Agreement?” As the term suggests, a Mutual Non-Disclosure Agreement is when confidential or sensitive information is being shared by both parties and both parties are also receiving confidential information.
On the other hand, a Unilateral Non-Disclosure Agreement is best fit for situations when only one party is disclosing confidential information or making it available to the other party. In short, there’s a clear distinction between the giving and receiving parties in a Unilateral Non-Disclosure Agreement.
If you’re only engaging in casual conversation, say having a coffee date with someone, there’s no need to sign a Non-Disclosure Agreement. A Non-Disclosure Agreement is mostly useful for when either (or both) of you are disclosing your financials, marketing plans, or other sensitive information to explore a collaboration or partnership.
Mutual Non-Disclosure Agreement
A Mutual Non-Disclosure Agreement is perfect if you will both be sharing sensitive information. Essentially, all parties involved will agree to keep the information that you’re sharing in the circle of trust.
However, you must remember that a Mutual Non-Disclosure Agreement isn’t applicable for all types of conversations.
When Can I Use a Mutual Non-Disclosure Agreement?
As mentioned above, a Mutual Non-Disclosure Agreement is shared between two businesses or among several parties. Specifically, you can use a Mutual Non-Disclosure Agreement during:
Collaborations and Partnerships
Partnerships and collaborations are naturally a multi-flow type of agreement. Both parties are disclosing information on how they can leverage their business strengths and create something together. Hence, a Mutual Non-Disclosure Agreement would be necessary.
Another situation where you can apply a Mutual Non-Disclosure Agreement is when you’re facilitating a mastermind. You want to create a safe space for everybody involved and safeguard the integrity and confidentiality of the conversations that happened inside the group. Thus, you can integrate the confidentiality clause into your mastermind agreement.
If you’re working with an existing contract template that doesn’t discuss confidentiality, consider layering a Mutual Non-Disclosure Agreement on your contract now.
Unilateral Non-Disclosure Agreement
The type of Non-Disclosure Agreement is dependent on the relationship and the exchange of information. If it’s only one person who will be disclosing sensitive information during a business relationship, that’s a Unilateral Non-Disclosure Agreement.
For example, in most cases, hiring an independent contractor (or employee) falls under the Unilateral Non-Disclosure Agreement because your business is likely making accessible confidential information for their use and to fully provide the services that they’re being contracted to provide. Now, you might think that it sounds fair to make everything neutral and mutual as a business owner. However, I want you to never accept additional liability, especially when the flow of communication isn’t mutual. See why below!
Why You Shouldn’t Keep All Your Agreements Mutual
You might think that a Mutual Non-Disclosure Agreement is easier (and more friendly,) but it comes with an added liability, which you should avoid. When your business accepts the responsibility of keeping information confidential, there needs to be a process to treat that information as confidential, including making sure that only team members on a need-to-know basis can access this information.
There should be a level of security because of where our businesses operate in a digital capacity. Making sure that information is kept confidential is important. So, you can’t accept the responsibility to keep confidences where it doesn’t make sense. If it’s not mutual, you can’t take on that liability. I want you to advocate for your business and limit your liability.
Non-Disclosure Agreements and Your Purpose
When choosing between the two types of Non-Disclosure Agreement for your business, you should always consider your purpose. You must clearly define the reason for sharing, including a description of why the parties are sharing the particular information. The purpose here is the limiting factor.
When preparing a Non-Disclosure Agreement, try asking these three questions:
- Who is sharing sensitive information?
- What type of information will be shared?
- What is the intended use or purpose of this information?
The answers will help you decide whether you need a Mutual or Unilateral Non-Disclosure Agreement, define what information is confidential, and how to describe the purpose.
Non-Disclosure Agreement vs Non-Disparagement Clause
Now you already know the difference between Mutual and Unilateral Non-Disclosure Agreements. Let me present the distinction between a non-disclosure agreement and a non-disparagement clause.
Disparagement is essentially saying, “don’t say anything bad about us.” Sometimes it even goes as far as to say even if they’re true. On the other hand, a non-disclosure says, “don’t share our sensitive information or privileged conversations.” Simply put, non-disparagement is more of the communication in the general sense, where what’s at stake is goodwill and reputation.
The bottom line is you need to listen to your intuition as to whether you’re going to use a non-disclosure agreement in your communications. Generally, Non-Disclosure Agreements apply to building business relationships rather than casual conversations. When in doubt, have a Non-Disclosure Agreement.
If you need any support on your Non-Disclosure Agreement, you can buy it now in our shop. Our bundle includes both a Unilateral and Mutual Non-Disclosure Agreement plus as an added bonus—our implementation guide, video tutorials for each type, and access to any future updates!