Mutual NDAs are better not just because they’re mutual but because the terms make more sense.
I regularly recommend the Waypoint NDA to clients who need a basic NDA, meaning one that is intended to allow them to begin discussing a potential transaction quickly and cheaply while taking reasonable steps to protect the interests of the parties.
Sometimes, a CEO will say “make this a unilateral NDA because they’re not giving us any info.”
This approach usually doesn’t create any benefits, let alone advantages. Sometimes it's a net loss.
First: many counterparties will simply request as a matter of course that any NDA be mutual. Unless you have a contract of adhesion, where you’re willing to walk away from negotiations rather than agree to an NDA, or the situation is legitimately one where an NDA shouldn’t be mutual, you’re going to agree. So why waste time and money trying to gain a trivial advantage?
Second, if one party is trying to be protected, it will ask for all kinds of terms. If the other is only bound, it will push back on all the terms as a matter of course.
This means that the terms may not end up at the right place, which is an “efficient” allocation of risks (from a law & economics perspective). Any mismatch means something is wasting value.
Third, if you're trying to get unrestricted access to the other side's confidential information, then you're already asking for trouble. See point 1.
The outcome in a world where the NDA is mutual is that point 2 never arises because both sides are now more aligned on terms: neither wants to extract a term so onerous that it wouldn’t want to have to observe it.
That in turn is why it saves everyone time and money by starting with a mutual NDA, such as the Waypoint NDA. It’s designed by real lawyers* so that our clients can trust that the terms make sense - on both sides - while protecting everyone.
From a board perspective, fighting over terms you’re going to agree to is seldom part of the strategic plan or how I expect the CEO to create shareholder value.
- I’m one of the lawyers contributing to the project, which is led by Kyle Mitchell.
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