How To Create a Simple NDA

What are the customer contracting best practices for an IT based company?

I will try to address this, with some practical examples in this Part II of the series on Customer IT Contracting Best Practices. Let’s get started.

Here is the first page of our specimen:

A copy of an ‘Agreement for Exchange of Confidential Information’ (i.e. an NDA). Take a look.

What is your first impression? Does it look transparent or complex?

If you look at the layout of the agreement, you will see that the drafter was really trying to be clear (i.e. realizing that a non-lawyer was probably going to be reading the agreement) and transparent about the terms, as the agreement is super easy to read:

• lots of whitespace
• separates the language vs. placing it all in one long incomprehensible paragraph
• uses bold to accentuate certain words, and
• very short clauses, etc.

To be more specific, the section below is where the agreement defines the term ‘Information.’ The drafter could have hid this definition in a long complicated paragraph (as lawyers usually do) but instead they put it at the top of the agreement and laid it out so it is really easy to grasp.  Another way to say this is, layout matters!

Is the agreement short and simple?

I would say yes, but remember this exercise is not about who has the shortest agreement. The agreement should not only be short and simple, but it also needs to clearly address the applicable legal issues. This 2-page agreement just happens to do all of that. The drafter also used a plain English drafting style and there is effectively no legal jargon (witnesseth, whereas, therein, Latin phrases, etc). They addressed important legal issues like exceptions to confidentiality, and listed them in a simple and clear manner. Take a look below.

Is this agreement balanced or one-sided?

I would say very balanced. As this is a mutual exchange of confidential information agreement, you can get a sense for what reciprocal clauses look like in creating a more balanced agreement. Most people that review agreements like the idea of having reciprocal clauses, as they seem fair on their face (assuming they make sense of course). In this agreement, the reciprocal clauses work the same way for each party. If an agreement is not balanced, you may have some clauses that favor one party but not the other. Here are some examples of the reciprocal clauses:

Maybe I forgot to mention whose agreement this is?

This is the form IBM Agreement for Exchange of Confidential Information.

Yes, the technology company that has been contracting for IT software and services longer than anyone (in any major way) has a simple, short, and balanced confidentiality agreement; kind of makes you think that maybe this was intentional. By the way, I have recently seen that Microsoft is onboard too, as they are starting to simplify and shorten their confidentiality agreement. Have you thought about looking at your form of confidentiality agreement, or maybe your EULA or SAAS Agreement?

Disclaimer: This article does not constitute legal advice, and is for informational and educational purposes only. Contact your attorney for legal advice.