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Mutual Non-Disclosure Agreement (NDA)

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Mutual Non-Disclosure Agreement (NDA)

Updated March 11, 2024

A mutual non-disclosure agreement, or 2-way NDA, is a document that two parties can use to agree not to disclose confidential information to any third party. If either party releases any of the information shared, they may be liable to legal and monetary damages.

How to Create a Mutual NDA (3 steps)

  1. Identify Each Other’s Confidential Information
  2. Enter the Duration of the NDA
  3. List the Consequences

1. Identify Each Other’s Confidential Information

person identifying NDA information on laptopAn NDA can either broadly state the information that is confidential, e.g. business plans, client lists, trade secrets, etc., or write the specific details that are not to be shared.

Sample Mutual NDA

When Apple and Gorilla Glass partnered to make iPhones together, both had protections in their NDA to protect their proprietary information. Apple even went as far as to include a $50 million penalty if Gorilla Glass decided to break the agreement.

2. Enter the Duration of the NDA

person filling out mutual non-disclosure agreement on laptopMost NDA’s have an expiration period or a statement disclosing that “if any of the confidential information in this agreement becomes widely known, through other sources or by the party themselves, that the agreement is no longer valid.”

With a mutual NDA, this may not be applicable if both parties are agreeing to keep the same information confidential. In this case, the parties will both be required to most likely keep the details and information secret until the end of the NDA.

3. List the Consequences

person taking notes of NDA breach consequences

An NDA has two (2) options for consequences to write in the event of a breach by any of the parties:

  1. Broad Language (“Equitable Relief”) – The parties may choose to use broad language such as “the breaching party will be responsible for equitable relief for any damages and/or loss of business that occurred due to said breach.” This would allow the party non-breaching party to allow the court to come up with the total amount owed by the breaching party. In most cases, the NDA will also contain language stating party that breached the contract will be responsible for attorneys’ fees for both parties.
  2. Specific Language – The parties may also use specific language in the event of a breach by any of the parties. Under this scenario, there should be a specific amount stated (such as one million dollars ($1,000,000)) if a breach is made by either party. The issue with this route is if for any reason the trade secret becomes more valuable than the penalty, one (1) of the parties would find it’s in their best interest to reveal the trade secrets to outside sources.

In most cases, it will not matter which type of consequence is chosen. What matters is that if there is a breach that the party that was inflicted damages will be compensated by the other party.

How to Write

Step 1 – Download in PDF, MS Word, or OpenDocument.

Step 2 – The date that the agreement is entered into must be supplied. Below this, the name of Party A and Party B.

Step 3 – In the last empty field of the first page, there is a field for the period of time from the date of disclosure that a party must refrain from sharing the disclosed information.

Step 4 – The duration of the agreement’s effectiveness can be indicated on the second page.

Step 5 – Both parties must print and sign their name as well as provide the date. This will place the agreement into effect.