Mutual vs Unilateral NDA (What’s the Difference)

Mutual NDA

Mutual NDA is an agreement between two parties that are about to get into a business arrangement or any other partnership whereby the two parties will benefit. To make such a partnership a success, each of the two parties will be required to give some confidential information that can be a threat to the party if the partnership fails. An example of a situation when mutual NDA is required is when one party approaches a technology company with a business proposal of a possible innovation because both parties will have to divulge some confidential information.

Mutual NDA binds the parties involved in the disclosure of confidential information by identifying information regarded as being confidential. The agreement also protects the startups seeking financial aid from financial institutions to ensure that the information in the business plan has not been compromised. Also, the agreement is an important legal instrument that protects both parties that divulge information during a business transaction.

The legal value of mutual NDA is that all the confidential information that was discussed during the negotiation should not be used by the receiver in case the agreement fails. Furthermore, firms that are in the technological field use this type of agreement to restrict their employees from divulging confidential information that can be used against the firm and reduce its competitive advantage.

Unilateral NDA

Unilateral NDA is an agreement used by one party that intends to get involved in a merger and acquisition business. Usually, the party will divulge some confidential information to ensure that the transaction ends successfully. The information could be a business plan, trade secret, financial statements, and any document that is deemed to be confidential. The receiver has the responsibility of ensuring that the information has been kept as private. An example of a situation when the agreement is required is when a party presents a business proposal to a financial institution in order to have a startup capital processed.

The agreement ensures that the disclosing party is guaranteed the confidentiality of the information that has been divulged. On the other hand, the receiver of the information has the responsibility that the information remains a secret even after sharing it with employees and shareholders to ensure that the work has been successfully completed. To ensure that the information remains confidential, the receiver has to establish some measures that will satisfy the disclosing party.

The legal value of Unilateral NDA is that the disclosing party will be protected by having its confidential information treated as a secret and hence eliminate the chances of the business being compromised with. The agreement also enables the disclosing party to have grounds to sue the receiver in case the receiver does not comply.

Differences between Mutual NDA and Unilateral NDA

While mutual NDA gives the responsibility of keeping confidential information as a secret to both parties, Unilateral NDA gives the responsibility to the receiver only. The mutual NDA aims at benefiting all the involved parties, while unilateral NDA aims at offering documents for evaluation to the receiving party.

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