Non-disclosure agreements play a vital role in safeguarding sensitive information and maintaining confidentiality in various business relationships. In Texas, these agreements hold significant legal weight and are frequently utilized by businesses. Whether you’re a business owner or an employee, having a solid understanding of a standard Texas non-disclosure agreement is crucial. Here are some frequently asked questions about NDAs and how they work.

 

What Is a Non-Disclosure Agreement?

A non-disclosure agreement (NDA) is a legal contract that prevents individuals from sharing specific confidential information they use or read during their employment. Non-disclosure obligations are usually listed in a standalone contract or incorporated into a comprehensive employment agreement.

What Are the 5 Key Elements of a Texas Non-Disclosure Agreement?

The key elements of a Texas non-disclosure agreement typically include the following:

  • A detailed description of the confidential information;
  • The parties’ requirements and obligations;
  • Any exclusions to the confidentiality agreement;
  • The duration of the NDA; and
  • Consequences for breaching the NDA.

Generally, the strongest non-disclosure agreements are narrow in focus rather than being overly broad. For example, NDAs often include information that could jeopardize the business if revealed. This includes things like business models, financial information, test results, trade secrets, proprietary technical documentation, and more.

Are Non-Disclosure Agreements Enforceable in Texas?

Yes, non-disclosure agreements are enforceable in Texas. That being said, NDAs with a reasonable scope are more likely to hold up in court if challenged. Sometimes, if a challenged NDA is too broad, the court may reform it. This means that the business cannot recover damages from violations of the previous agreement.

Read: Are Non-Competes Enforceable in Texas in 2023?

How Long Is a Non-Disclosure Agreement Valid?

While Texas courts favor NDAs with a definite duration, they aren’t necessarily required to have one. Some NDAs are indefinite. Ultimately, it depends on the type of information being guarded and a few other factors.

What Situations Require a Non-Disclosure Agreement?

Non-disclosure agreements are commonly required in business negotiations, collaborations with third-party consultants, and employee onboarding. When engaging in business negotiations or considering a merger, bilateral NDAs ensure the protection of sensitive data between the parties involved. Similarly, when hiring employees, NDAs safeguard proprietary information and trade secrets. Additionally, collaborating with third-party consultants often necessitates NDAs to ensure the confidentiality of shared information throughout the collaboration.

Can You Be Sued for Breaking a Non-Disclosure Agreement?

Yes, the affected party in a non-disclosure agreement violation has the right to pursue legal action in civil court. Usually, this involves suing the responsible party for breach of contract. However, depending on the circumstances, other legal claims may arise, such as: 

  • Breach of fiduciary duty;
  • Copyright infringement; and
  • Other intellectual property violations.

In most situations, violating a non-disclosure agreement only results in civil penalties. However, some circumstances may result in criminal penalties, such as trade secret theft. 

What Makes an NDA Unenforceable in Texas?

In Texas, NDAs can be rendered unenforceable if they attempt to restrict a former employee from utilizing general knowledge in their new employment. In addition, if information in a non-disclosure agreement is not confidential or if it requires something illegal, it is likely invalid. It’s important to keep in mind that NDAs are specifically designed to safeguard confidential company information, and their enforceability is limited to such information.

Can You Refuse to Sign an NDA?

Yes, you can refuse to sign a non-disclosure agreement if you don’t agree with the terms. However, if you are a prospective employee, chances are that the business will refuse to hire you. Also, if you are a separate business negotiating with another company, refusing to sign could damage your relationship with your partner as well as your reputation.

Have Questions About NDAs in Texas? Wood Edwards LLP Can Help

At Wood Edwards LLP, our experienced attorneys have successfully represented both employees bound by NDAs and companies seeking to enforce them. Whether you’re considering the need for an NDA, ready to implement one, or dealing with a violation, we’re here to provide invaluable guidance.

With a strong background in litigation and arbitration, our team brings decades of experience in handling Texas non-disclosure agreements. We prioritize efficiency and personalized service. Rest assured, our attorneys are prepared to take the necessary action to safeguard your business’s best interests or your rights as an employee. Don’t hesitate to reach out to us now.