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Understanding the Difference between an Independent Contractor Agreement and a Non-Disclosure Agreement

At Froese Law, we try to steer clear of legalese.  We prefer to discuss legal matters with our clients in a language that we can all understand, but sometimes those pesky legal acronyms sneak in.  One of the common questions we get from our clients is: what’s the difference between an IDA and an NDA?

What are Commercial Agreements?

Both independent contractor agreements (“IDA”) and non-disclosure agreements (“NDA”) are specific types of commercial agreements.  Commercial agreements are contracts between two parties that lay out the commercial terms of the working relationship.  In some instances, the commercial agreement is very specific to the nature of the relationship (i.e. influencer agreement, sponsorship agreement, licensing agreement, manufacturing agreement, distribution agreement, sales agency agreement, etc.).  In other instances, it is possible to standardize the terms of a commercial agreement for use with multiple different parties.  This is oftentimes the case with IDAs and NDAs.

What is a Non-Disclosure Agreement?

A NDA is used for the initial stage discussions with a third party with whom you’re contemplating entering into a business relationship.  The NDAS obligates those third parties to keep the information you disclose to the third party confidential, and also confirms that the information is proprietary to you.  Essentially, the NDA creates a contractual protection that enables you to disclose your confidential information/trade secrets, without risk that the third party will steal your confidential information.  If the third party does use your confidential information for its own benefit, you have a contract from which to enforce and can claim breach of contract.

Examples of when you would use a NDA include high level initial discussions with investors, potential business partners and third party services providers to discuss whether you want to enter into a business relationship with them/officially retain them.

NDAs are an important business tool to protect your competitive advantage.

What is an Independent Contractor Agreement?

An IDA is a commercial agreement that you use when you actually retain the third party service provider to work for you.  Contractors are not employees of your company, but rather are retained to perform a short-term, specific project.

Similar to the NDA, the IDA includes confidentiality provisions, however the IDA is far more comprehensive.  The IDA includes the actual business terms between the parties (i.e. payment, fees, services to be provided, deliverables, project milestones, quality of work, termination of relationship, etc.).  It is also important to note that without entering into a written agreement which provides for an assignment of intellectual property to your company, the assumption will be that the contractor will own the intellectual property it creates during the performance of the services.  So the IDA also includes an assignment of intellectual property and waiver of moral rights.

Examples of when you would use an IDA include a website developer, photographer, illustrator, graphic artist, etc.

IDAs are an important business tool to ensure that your company owns all rights and title to the product created by the contractor.