One Way and Mutual NDA Contract Review Strategies

December 21, 2021
December 21, 2021
Gary Sangha | Founder & CEO

Non-Disclosure Agreements (NDAs) protect confidential information like trade secrets, intellectual property rights, customer/client lists, and company business plans and processes from exposure, misuse, and theft.

Reviewing and signing these documents are standard practices for many businesses; however, when things go wrong, companies can become exposed to unnecessary liability. Does an NDA really protect you? That all depends on how it is written.

Use of artificial intelligence provides a breakthrough NDA contract review strategy for one-way and mutual NDAs

A thorough NDA contract review can help companies safeguard proprietary information. By employing NDA contract checklists, along with innovative legal artificial intelligence (AI) technology, legal departments can ensure their NDAs are enforceable. 

One Way NDA Contract Review Checklist

One-way Non-Disclosure Agreements—also called unilateral NDAs—often are found in employment or vendor contracts. One party agrees not to share confidential information belonging to the counterparty. Confusion often exists between the expert and the layperson in interpreting these contracts, with overly complex language muddying negotiations and unenforceable clauses in certain jurisdictions jeopardizing entire agreements.

Consider the following NDA contract review checklist to address potential issues:

✅Confidential Information: What information is protected? Clarity and precision in definitions are paramount, and any exception must be specified. Note that information already known, in the public domain, or legally required cannot be included. 

✅Disclosing Party Obligations: Are verbal disclosures necessary before sharing information, or does the written contract suffice? 

✅Receiving Party Uses: Who is allowed access to the information? In which cases can it be shared or distributed? Is notice required? Typical NDA use lasts three to five years but can be as short as one year.

✅Termination Clause: What happens to the information after termination of the contract? Does a breach in confidentiality automatically terminate a contract?

✅Jurisdiction: What process is necessary should a dispute arise? Where will legal proceedings take place? Who pays for legal costs?

Mutual NDA Contract Review Checklist

Mutual NDA contracts appear in mergers and partnership agreements, where parties exchange confidential information requiring some level of protection. These agreements are replete with complexities, and issues can arise due to unclear definitions, poorly defined scopes, or non-disclosed subsidiaries. 

Follow these steps in a mutual NDA contract review checklist to avoid common disputes:

✅Party Introduction: All subsidiaries and segments must be listed.

✅Purpose: Why is confidential information shared? There is no “disclosing” or “receiving” party here. Both parties are involved and subject to the same rules.

✅Confidential Information: What information is designated “confidential,” and how can confidential information be used? What restrictions and exceptions apply? What is the term? Are ownership rights given?

✅Governing Law, Notices, and Equitable Relief: Which state laws apply? How should official or legal correspondence be delivered? What equitable relief is allowed for violation of the agreement? Which venues are allowed? 

✅Severability: Is the entire agreement undone in the event of a violation, or are the terms protected and enforceable?

Level-Up Your NDA Contract Review Process

Checklists provide an on-ramp to standardizing NDA contract review processes, but room for human errors and omissions persists. Implementing a contract negotiation playbook template is another strategy for greater process control, but it also relies on significant attorney oversight. 

Artificial Intelligence legal technology by LexCheck leverages an AI Digital Playbook and enables almost instantaneous NDA contract review guaranteed to align with company standards. Implementing this solution is as easy as sending an email or uploading an agreement to the platform. The AI not only checks to see that the contract meets playbook standards, but red flags, annotates, and offers context-based corrections for any issues detected. 

By adopting an advanced AI-powered solution, companies reviewing NDAs can reduce cycle time from five days to one, decrease high-level escalations from 80% to 10%, and assure 100% risk transparency that was previously unattainable.

LexCheck’s AI-powered platform automates and accelerates NDA contract review. To learn more about our software, contact us at Request a demo to experience the technology first-hand.

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