What is a Non-Disclosure Agreement (NDA)?
A Non-Disclosure Agreement (NDA) is a legally binding contract between two parties that restricts the sharing of specific, sensitive information belonging to one of the parties.
When a recipient of confidential information signs an NDA, they agree not to disclose it to any unauthorized persons or organizations. The contract will set out consequences and legal remedies for failing to keep the confidential information private.
LawDepot’s Non-Disclosure Agreement template can be used to create a valid agreement in all Canadian provinces and territories.
NDA vs. Confidentiality Agreement
NDAs and Confidentiality Agreements are often used interchangeably because they both protect sensitive information shared with another person or organization.
LawDepot’s Non-Disclosure Agreement template allows you to easily create a document that safeguards your confidential information while using the more commonly recognized NDA title.
Types of Non-Disclosure Agreements
There are two types of NDAs:
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- Unilateral (one-way): One party agrees not to disclose confidential information (the recipient). Therefore, they’re the only ones bound to confidentiality. Also known as non-mutual NDAs.
- Bilateral (mutual): Both parties exchange confidential information in a single document to protect their interests.
Our template is only available for a unilateral (one-way) NDA. If you need a mutual agreement, you can use our template to create two documents with the parties switching roles.
What information do Non-Disclosure Agreements protect?
NDAs protect confidential information; this means the details being disclosed are not common knowledge or already in the public domain. Types of information that can be protected include:
- Business operations, such as employee data, operational costs, strategies, and vendor details
- Customer data, like client contact information, contracts, and purchase history
- Intellectual property and proprietary information, like trade secrets or copyrighted work
- Products or processes, including research, designs, and manufacturing techniques
- Accounting and finances, like annual reports, company liability, and payroll records
- Computer technology and security, such as proprietary code, passwords, and operating procedures
What should be included in a Non-Disclosure Agreement?
Key components of an NDA include:
- Definition of confidential information
- Details of private information that needs protection
- Permitted use of shared confidential information
- Both parties’ names, contact details, and location (i.e., the information provider and recipient)
- Duration of the contract (i.e., how long the contract will be enforced)
- Governing law (i.e., the provincial or territorial law under which the contract will be enforced)
- The recipient’s signature
When should you use a Non-Disclosure Agreement?
An NDA can be used in a variety of situations in Canada, such as the following scenarios:
1. When an employee takes on a new role
NDAs can protect your business’s interests when employees take on a new role within a company and will have access to confidential information (e.g., marketing strategies or customer data) they didn’t have before, and that isn’t covered by a confidentiality clause in their employment contract. An agreement can help deter employees from sharing or misusing private information and clarify that there may be consequences for failing to meet their obligations.
Alternatively, if you don't want to create NDAs for your employees and won't need to discuss any trade secrets before hiring, you can include confidentiality clauses in Employment Contracts that will protect your sensitive business information.
2. Hiring a contractor or consultant
NDAs protect your confidential details and interests when you hire a contractor or consultant. As with employees, independent contractors and freelancers may need access to your Business Plan, customer data, or other information to perform their responsibilities.
Be sure to use Independent Contractor Agreements and Consulting Agreements when hiring contractors and consultants.
3. Selling a business
When selling all or part of your business through the sale of shares or assets, a prospective buyer will conduct due diligence by requesting access to the business's financial records and other confidential information (e.g., trade secrets, employee data, client lists, profits, or losses).
Before you disclose anything, ask prospective buyers to sign an NDA.
After the NDA is signed, both parties should consider signing a Letter of Intent outlining their intent to complete the transaction following due diligence.
4. Discussing an invention or idea
To evaluate an invention (e.g., a product, plan, design, or recipe), investors or potential buyers often require access to confidential information about it before deciding whether to become involved. When discussing an invention or idea, an NDA allows investors, buyers, and other collaborators to make an informed decision without misusing or sharing your intellectual property beyond the agreement’s terms.
In an NDA for inventions or ideas, you should describe the confidential information broadly enough without revealing the protected invention before signing.
When is information not confidential?
An NDA can only protect information that is confidential. If information is already in the public domain by some other means, then the recipient can’t be restricted from using that information. For example, information cannot be classified as confidential if it is:
- Already known in a specific industry
- Publicly known through no fault of the recipient
- Already rightfully in the possession of the recipient
- Created by the recipient through their own independent research
- Rightfully disclosed and obtained from a third party
It’s also important to note that an NDA cannot be used to conceal or prevent the reporting of illegal activities (e.g., filing a complaint with Human Rights Commissions), to restrict lawful whistleblowing, or to prohibit someone from talking to the police.
Provinces and territories may also have additional restrictions on NDAs. For example, in Prince Edward Island, the Non-Disclosure Agreements Act restricts the use of NDAs in situations such as workplace or personal harassment and discrimination.
Always check your jurisdiction's laws for restrictions on when you can use an NDA, or talk to a lawyer if you have questions or are unsure about any restrictions.
How to make a Non-Disclosure Agreement
Use LawDepot’s Non-Disclosure Agreement template to have your contract ready in minutes. Select the relationship between the parties and complete the following steps:
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- Add the scope of confidential information (i.e., all shared information or specific information)
- State the permitted use of the confidential information
- State the location of both parties
- Document the names and addresses of both parties
- Specify the duration of the agreement
You can also include additional clauses in your NDA. For example, you may include a non-compete clause that restricts the receiving party from launching a competing company or providing confidential information to competitors. Please note that Ontario does not allow employers to enforce non-competes against employees, except in limited circumstances, such as for executives and in the sale of a business where the seller becomes an employee of the buyer.
Additionally, you may include a non-solicit clause that prohibits the receiving party from using the confidential information to entice the disclosing party's contractors or employees to work for them instead.
Non-Disclosure Agreement FAQs