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The relevance of nondisclosure agreements for some TN businesses

Experienced Tennessee business law attorneys routinely help commercial principals across the state create agreements that are critically important for their enterprises. The work that proven legal counsel does spans contract preparation, negotiation, review, periodic revision and, when necessary, enforcement.

The sheer scope of potentially relevant contracts for a given business is impressively broad. Common types of commercial contracts include these agreements:

  • Partnership/shareholder agreements
  • Employment agreements
  • Noncompete agreements
  • Joint venture contracts
  • Purchase/sale agreements
  • Indemnity contracts

There is of course a vast universe of key contracts beyond what is listed in those bullet points. We spotlight one such agreement in today's blog entry, namely, the nondisclosure agreement.

That contract (sometimes also termed a confidentiality or secrecy agreement) is often referenced by the shorthand acronym of NDA, which we will employ in this post. Broadly speaking, businesses seek to derive comfort and control risks by executing NDAs with select workers having inside knowledge of important company information. A key employee might have an insider's awareness of things like the following:

  • Company's intellectual property, including proprietary know-how and trade secrets
  • Business plans
  • Customer lists and pricing formulae
  • Executive compensation

"Information is power," notes one online overview of nondisclosure agreements and their enforcement, and it is thus logical why company principals would want to control it.

The key question is whether businesses sometimes go too far in their efforts to do so.

The answer to that is simple and often borne out by litigation. Indeed, companies sometimes do render the terms and conditions of an NDA sufficiently exacting to invite a court's disfavor and a judicial ruling of unenforceability.

Although courts consider many factors when evaluating NDAs, their scrutiny will typically focus tightly on whether a nondisclosure contract is reasonable in terms of time and scope. A court that finds an NDA to be overly vague or burdensome will view it as unreasonable and legally unenforceable.

The bottom line with a nondisclosure agreement is that it must be carefully drafted. Business law attorneys with extensive experience writing and enforcing commercial contracts can provide further information.

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