Creating a Non-Disclosure Agreement (NDA) is an essential step in safeguarding your business’s sensitive information. However, even a small mistake in drafting your NDA can leave your intellectual property vulnerable or render the agreement unenforceable. Knowing the common mistakes to avoid when creating NDAs can save you from potential legal and financial troubles.
In this article, we’ll explore the most common pitfalls businesses face when drafting NDAs and how to avoid them. This guide will help entrepreneurs, business leaders, or startup owners create effective NDAs that protect their interests. Plus, we’ll show you how the Employer-Employee Protection Bundle simplifies the process.
Why Are NDAs Important?
NDAs are legally binding agreements that protect sensitive information shared between parties. They prevent unauthorised disclosure of trade secrets, client lists, financial details, and other proprietary data.
From hiring employees to collaborating with partners, non-disclosure agreements provide the security businesses need to share information confidently.
However, a poorly drafted NDA can lead to:
- Legal disputes.
- Loss of confidential information.
- Damage to your competitive advantage.
Let’s dive into the most common mistakes entrepreneurs make when creating NDAs and how to steer clear of them.
Mistakes to Avoid When Creating NDAs
Below are common mistakes business owners must avoid when creating their NDAs.
1. Using Vague Language
One of the most common mistakes when creating NDAs is using vague or overly broad language. Phrases like “all business information” or “any confidential data” are imprecise and can make the NDA unenforceable.
Courts often favour specificity and may dismiss agreements that are too broad or ambiguous.
For example, imagine an NDA that simply states: “All information shared is confidential.”
Without defining what qualifies as “confidential information,” disagreements can arise over what is covered under the NDA.
How to Avoid Vague Language Mistake In An NDA
- Be Specific: Clearly define “confidential information” in the NDA. Use categories such as:
- Trade secrets.
- Financial records.
- Client lists.
- Product designs or prototypes.
- Marketing strategies.
- Provide Examples: Include specific examples of what is considered confidential to give clarity to all parties.
- Define Exclusions: Specify what is not considered confidential, such as publicly available information, data disclosed under legal requirements, or information already known to the receiving party.
Learn more about defining confidentiality in NDAs in our guide: How to Draft an Effective NDA.
2. Ignoring Customisation
Many businesses make the mistake of using generic NDA templates without customising them to their specific needs.
While templates are a great starting point, they rarely account for the unique nature of each business relationship. A one-size-fits-all NDA may fail to cover important details, leaving your information vulnerable.
For instance, an NDA for an employer-employee relationship will differ significantly from one used for a joint venture. Using the wrong type of NDA can create loopholes or unnecessary obligations.
How to Avoid the Mistake of Using Generic NDA
- Assess Your Needs: Determine whether you need a unilateral NDA (one party discloses information) or a mutual NDA (both parties share confidential data).
- Customise Key Clauses: Tailor sections such as confidentiality definitions, duration, and permitted uses to reflect the specific nature of the agreement.
- Use Professional Templates: Start with a professionally crafted template, like those included in the Employer-Employee Protection Bundle, which are designed to be customised easily for various business scenarios.
Get access to tailored NDA templates in our Employer-Employee Protection Bundle.
3. Failing to Include Key Clauses
An NDA without essential clauses is like a leaky bucket—it can’t hold up under scrutiny. Missing clauses leave gaps in protection, which can be exploited during legal disputes.
For example, failing to include a remedies clause can make it challenging to seek damages in case of a breach.
How to Ensure Your Put Key Clauses
Ensure your NDA includes the following critical clauses:
- Definition of Confidential Information: Clearly state what information is protected.
- Permitted Uses: Outline how the receiving party can use the information (e.g., “only for project development purposes”).
- Exclusions: Specify what isn’t covered (e.g., publicly available data).
- Duration: Define how long the confidentiality obligations last.
- Breach Consequences: Detail remedies, such as financial penalties, injunctive relief, or reimbursement of legal fees.
4. Overlooking Jurisdiction and Governing Law
When NDAs don’t specify the jurisdiction, disputes may be resolved in locations unfavourable to your business.
For example, if an agreement is signed with a foreign partner, you could face expensive legal battles in an unfamiliar legal system.
How to Avoid Jurisdiction Mistakes In An NDA
- Choose a Familiar Jurisdiction: Specify a governing law that aligns with your business location. For instance: “This agreement shall be governed by the laws of Nigeria.”
- Consider International Agreements: If working with overseas partners, include an arbitration clause to streamline dispute resolution.
Including a jurisdiction clause ensures legal clarity and minimises costly misunderstandings.
5. Setting Unreasonable Time Frames
Setting an excessively long or indefinite confidentiality period can deter parties from signing the NDA. Conversely, a timeframe that’s too short may not provide adequate protection, especially for trade secrets or long-term projects.
How to Avoid Time Frame Mistakes
- Be Realistic: Align the timeframe with the nature of the information. For example:
- Short-term projects: 1–3 years.
- Trade secrets: Indefinite duration.
- Specify the Duration Clearly: Use precise language, such as:
- “The confidentiality obligations under this agreement shall remain in effect for five (5) years from the date of disclosure.”
By striking a balance, you ensure the NDA is fair and enforceable.
See Also: Understanding NDAs and when they can be broken.
6. Not Addressing Exclusions
Without exclusions, even information that is publicly available or legally obtained by other means could fall under the NDA. This creates unnecessary disputes and weakens the agreement.
How to Avoid Exclusion Mistakes
- List Exclusions: Common exclusions include:
- Publicly known information.
- Data disclosed by third parties without restrictions.
- Information already known to the receiving party.
- Use Examples: For instance, specify:
- “Confidential information does not include any information that is publicly available at the time of disclosure.”
Exclusions create clarity, reducing friction and potential disputes.
7. Failing to Monitor and Update NDAs
As businesses evolve, so do their needs. Relying on outdated NDAs can leave new projects or relationships unprotected, exposing your business to unnecessary risks.
How to Ensure Your NDA is Up to Date
- Periodic Reviews: Regularly audit your NDAs to ensure they remain relevant.
- Update for New Projects: Create new NDAs when the scope of work changes or new information is shared.
- Seek Legal Advice: Work with legal experts to adapt existing agreements to evolving circumstances.
By keeping NDAs up to date, you ensure continuous protection for your business.
How the Employer-Employee Protection Bundle Helps
Drafting NDAs and other essential business documents can be overwhelming, especially when trying to avoid common mistakes. The Employer-Employee Protection Bundle takes the guesswork out of the process, equipping you with five powerful tools to safeguard your business:
- Customisable NDA Templates: Include an NDA template to protect sensitive information in any business scenario.
- Non-Compete and Non-Solicitation Agreements: Ensure employees don’t work for competitors or poach your clients.
- Comprehensive Employment Contract Template: Define roles, responsibilities, and expectations clearly to prevent misunderstandings.
- Comprehensive Employee Handbook Template: Set clear policies, procedures, and best practices to guide your team effectively.
- 61 Role-Specific Job Descriptions: Streamline hiring and operations by defining roles with precision.
With these resources, you can create tailored, legally enforceable agreements that protect your business while saving time and effort. Secure your peace of mind today—get the Employer-Employee Protection Bundle here.
FAQs About Creating NDAs
Q: Can I use a free NDA template?
A: Free templates can be a starting point, but they often lack customisation and key clauses. A tailored NDA is more effective.
Q: Are NDAs legally enforceable in Nigeria?
A: Yes, NDAs are enforceable in Nigeria if they meet legal standards and include essential clauses.
Q: How long should an NDA last?
A: The duration depends on the nature of the information. Most NDAs last 3–5 years, but trade secrets may require indefinite protection.
Q: Can an NDA protect verbal agreements?
A: NDAs typically protect written and tangible information. For verbal agreements, document the details in writing for clarity.
Q: Can I use an NDA template without customisation?
A: Generic templates may not address your unique needs. Tailoring the NDA ensures comprehensive protection.
Q: What happens if I omit a jurisdiction clause?
A: Without it, disputes may be resolved in an unfavourable or inconvenient legal system.
Q: How do I make an NDA enforceable?
A: Include key clauses, specify jurisdiction, and ensure the language is clear and precise.
Conclusion
Creating an effective NDA starts with being specific about what constitutes confidential information and tailoring the agreement to meet your unique business needs.
Including essential clauses—such as confidentiality definitions, exclusions, duration, and breach consequences—ensures your agreement is robust and enforceable. Avoid common mistakes when creating your NDAs like vague language, missing jurisdiction clauses, and unrealistic time frames to strengthen your NDA’s effectiveness.
To make the process seamless, consider using the Employer-Employee Protection Bundle, which provides professionally crafted templates to save time and minimise risks.
By addressing these critical elements and avoiding common pitfalls, you can draft NDAs that safeguard your business and build trust in your professional relationships.
