Unilateral NDAs vs. bilateral NDAs: understanding the key differences

In this blog, we will explore the main differences between unilateral and bilateral NDAs, shedding light on their distinct characteristics and highlighting when each type of agreement may be appropriate.

Unilateral NDA

A unilateral NDA, also known as a one-way NDA, is a contract used when only one party is disclosing confidential information. In this type of agreement, the receiving party is obligated to keep the disclosing party's confidential information confidential and refrain from disclosing it to third parties. The receiving party's primary obligation under a one-way NDA is to maintain the confidentiality of the disclosed information. This means that the receiving party must not disclose the confidential information to any third party or use it for any purpose other than what is expressly permitted in the agreement. The receiving party is expected to safeguard the information and take necessary measures to prevent unauthorised access or disclosure.

Bilateral NDA

A bilateral NDA, commonly referred to as a mutual NDA, is a legally binding agreement used when both parties involved in a business relationship or collaboration will be disclosing confidential information to each other. The purpose of a mutual NDA is to establish a reciprocal obligation between the parties to maintain the confidentiality of the disclosed information. This means that both parties are bound to keep each other's confidential information secure and refrain from disclosing it to any third parties without prior consent.

By implementing a one-way NDA, both parties can have peace of mind knowing that their sensitive information is protected, creating an environment of trust to collaborate without fear of unauthorised disclosure.

What are the main differences between unilateral and bilateral NDAs?

The key differences between unilateral and bilateral NDAs are in the scope of protection and the obligations of the parties involved. Here are the main distinctions:

Information flows one-way

A one-way NDA is used when one party shares confidential information with another party, such as a company disclosing proprietary technology to a potential investor. It is a one-sided flow of information. In contrast, a mutual NDA is employed when both parties intend to share confidential information with each other. It is often used in collaborations, joint ventures, or partnerships where both parties need to exchange sensitive information.

Scope of protection

A one-way NDA primarily protects the disclosing party's confidential information. It restricts the receiving party from disclosing or using the disclosed information for unauthorised purposes. This means that only one party's confidential information is secure when entering into a one-way NDA.

In contrast, a mutual NDA protects the confidential information of both parties involved in the agreement. It establishes obligations for both parties to maintain the confidentiality of the information they share.

Obligations of the parties

In a one-way NDA, the primary obligation falls on the receiving party to protect and maintain the confidentiality of the disclosed information. The receiving party must not disclose the information to third parties or use it for unauthorised purposes. On the other hand, a mutual NDA imposes reciprocal obligations on both parties. Each party agrees to protect the other party's confidential information with the same level of care and restrictions.

Level of protection

While both types of NDAs provide legal protection for confidential information, a mutual NDA offers greater assurance for both parties. It ensures that each party's confidential information is safeguarded, eliminating concerns about one-sided disclosure and potential misuse.

The importance of a well-defined term in a unilateral NDA or a bilateral NDA

A well-defined term in any NDA is crucial for setting clear expectations and avoiding ambiguity. Including a clear term in the agreement will help both parties understand their obligations and provide a clear framework to assess if the parties are complying with terms of the agreement. A specific duration also helps ensure that the receiving party does not unintentionally breach the NDA by disclosing the information after the agreed-upon period.

When drafting or reviewing a unilateral NDA template or bilateral NDA template, it's essential to carefully consider the appropriate term of the confidentiality obligations and ensure the period is reasonable. The term should be line with the party’s legitimate interests when taking into consideration the nature of the information and circumstances.

For more information about the essential components of unilateral and bilateral NDAs, check out these top tips and our comprehensive guide. 

Conclusion

Understanding the differences between one-way NDAs and mutual NDAs helps businesses determine the appropriate type of agreement based on the specific circumstances of their information sharing and the desired level of protection for both parties involved.

Don’t leave it to chance; protect your confidential information with a well-drafted unilateral NDA or bilateral NDA today. You can create your very own NDA using Docue's fully-customisable templates:

• bilateral NDA; or

• unilateral NDA. 

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