When to Sign a Mutual NDA?

Answer 1

For many people, going through any form of a legal process can be a very stressful situation. While the fear of the outcome can be stressful all on itself, the fear of other people finding out about the case before it is complete can be equally as stressful, and possibly damaging to the case. For those worried about outside people finding out about the case at hand, having both parties involved in the case sign a mutual non-disclosure agreement could be a great idea.

A mutual non-disclosure agreement is a contractual agreement that states that all parties involved in the case will not discuss the details of the case or lawsuit. A mutual non-disclosure agreement must be signed by both parties in order for it to be valid. While many legal proceedings may be public record, there are many situations when it would be best for the case to remain private and for both parties to sign the agreement.

The first situation when a mutual non-disclosure agreement should be signed is when the case is a potential or active lawsuit that involves a publicly traded company. In many situations, a lawsuit against a company could be quite damaging to their profitability. If the company is publicly traded, losing or winning a lawsuit could have a drastic effect on their stock price. Because of this, people who have insider knowledge of the lawsuit could use the information to make money by buying or selling the stock. To prevent this from occurring, people involved in the case will often sign a mutual non-disclosure agreement that will prevent them from speaking both privately and publicly about the case.

If the mutual non-disclosure agreement is violated by either party, there could be serious consequences. First, many violations of the agreement will lead to additional lawsuits and possibly legally enforced fees. In situations where insider trading takes place, the party guilty of violating the mutual non-disclosure agreement could face additional penalty from the SEC or FBI. While this will normally be a flat fee, it could also end up being imprisonment in some severe situations.