Non-Disclosure Agreement (NDA)

by Joshua Malone

Many of our clients and applicants request a non-disclosure agreement (NDA) before submitting a bond application with confidential financial information. The NDA guarantees privacy between the disclosing party (the applicant) and the receiving party (the surety) by restricting how the receiving party utilizes the shared information. Typically, an NDA will limit the amount of disclosure to only the receiving party’s employees on a need-to-know basis concerning the shared information. Those employees include underwriters, attorneys, and accountants, and officers.

Receiving parties have an obligation under the NDA to notify the disclosing party immediately of any breach of the agreement, regardless of whether an employee inadvertently or intentionally shared the information outside his authority. Additionally, an NDA contains a provision for surrendering disclosed confidential information as evidence in response to a subpoena. The agreement compels the receiving party to notify the disclosing party in such an event.

Many NDA(s) also include language expressing that the agreement does not in any way bind the parties into a business relationship. This limits the liability of the receiving party strictly to the disclosed information. Sureties therefore have an incentive to cooperate with the terms of the agreement to demonstrate good faith in securing the applicant’s business, as well as to prevent any repercussions against the applicant should the applicant choose to place his business elsewhere.

At any point during the existence of the agreement, the disclosing party may request the receiving party to return any shared information or to confirm it’s destruction or deletion.

Non-disclosure agreements may terminate in three ways:

  1. By either party’s intent to terminate with 30 days written notice,
  2. Upon the disclosed information becoming public by an entity other than the receiving party,
  3. After a specified period of time, such as three years

Because sureties usually create non-disclosure agreements, courts may rule in favor of the receiving party for any conflicting or confusing language. Only in rare instances will a surety agree to edit or tailor the NDA to meet any clarifications or specifications made by the applicant.

Some underwriters refer to non-disclosure agreements as “confidentiality agreements.” They generally interchange the two terms.

An NDA is considered confidential

An NDA is considered confidential.

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