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When is a nondisclosure agreement fair and lawful?

Every employment circumstance is different, so if you're considering the fairness of a particular nondisclosure agreement, you need to review the unique circumstances of the job, person or party it applies to.

In many cases, a nondisclosure agreement makes perfect sense in Michigan, but sometimes it doesn't. If you're being asked to sign such an agreement, or if you're asking someone to sign such an agreement, it's important to review the legality of the document and its context. This will determine whether or not it will actually be enforceable in court.

Circumstances in which a non-disclosure is appropriate

Here are some typical circumstances in which a Michigan resident or business owner might ask someone to enter into a nondisclosure agreement:

-- When details about an invention are to be shared with a potential investor, partner or distributor

-- When disclosing marketing information, financial data or other information with a potential business buyer or investor

-- When providing access to sensitive information to a service provider

-- When providing access to sensitive information to an employee.

It's important for those planning to raise money for a startup to realize that venture capital investors will usually refuse to enter into a nondisclosure agreement. As such, it may not be realistic to ask for one to sign such a document.

Make sure your nondisclosure agreement is valid

A business owner could potentially make the mistake of having a potential partner, employee or investor sign an invalid nondisclosure agreement. If the agreement is invalid and it isn't enforceable in court, the business owner will not be able to receive any of the protections that the document is intended to provide.

Source: Forbes, "The Key Elements Of Non-Disclosure Agreements," Richard Harroch, accessed July 06, 2017

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