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NDA8 min read

Complete Guide to Non-Disclosure Agreements (NDAs)

Learn everything you need to know about NDAs: what they are, what to look for, common red flags, and how to negotiate better terms.

What is an NDA?

A Non-Disclosure Agreement (NDA), also known as a confidentiality agreement, is a legal contract that establishes a confidential relationship between parties. The party receiving confidential information agrees not to share it with others.

NDAs are commonly used in business settings when:

  • Discussing potential partnerships or investments
  • Hiring employees or contractors who will access sensitive information
  • Sharing proprietary technology or business strategies
  • Negotiating mergers and acquisitions

Types of NDAs

Mutual NDA (Two-Way)

Both parties share confidential information and agree to protect each other's secrets. This is the fairest type and preferred when both sides are sharing sensitive data.

Unilateral NDA (One-Way)

Only one party discloses information. Common in employment contracts. Be cautious—this puts all obligations on you.

Key Clauses to Review

1. Definition of Confidential Information

This defines exactly what information is protected. Look for:

  • Is it specific enough? Vague definitions can trap you.
  • Does it include information you might already know?
  • Are there clear exclusions for public information?

2. Duration / Term

How long must you keep the information confidential?

  • Standard: 2-5 years after disclosure
  • Caution: "Perpetual" or "indefinite" terms
  • Red flag: No end date specified

3. Permitted Disclosures

When can you share the information? Standard exceptions include:

  • Court orders or legal requirements
  • Information that becomes public through no fault of yours
  • Information you independently develop

4. Return of Materials

What happens to confidential materials when the relationship ends? Ensure you can comply with any return or destruction requirements.

Red Flags to Watch For

Overly Broad Definition

"All information shared by Company" with no exclusions. This could include publicly available information or things you already knew.

Perpetual Confidentiality

"Information shall remain confidential forever." Industry secrets become obsolete. A reasonable term is 2-5 years.

Non-Compete Hidden in NDA

Some NDAs sneak in non-compete clauses. Watch for language that restricts your ability to work in your field.

One-Sided Remedies

Allowing the other party to seek injunctions and damages, but not giving you the same rights if they breach.

How to Negotiate an NDA

  1. Ask for a mutual NDA if both parties are sharing information. This balances the obligations.
  2. Narrow the definition of confidential information to only what's truly sensitive.
  3. Add standard exclusions for public information, prior knowledge, and independent development.
  4. Limit the term to 2-3 years for most business information, up to 5 years for trade secrets.
  5. Remove or limit non-compete provisions that don't belong in an NDA.

NDA Review Checklist

  • Is the confidential information clearly and narrowly defined?
  • Are standard exclusions included (public info, prior knowledge)?
  • Is the term reasonable (2-5 years)?
  • Is it mutual or unilateral? Does that match the relationship?
  • Are there any hidden non-compete or non-solicit clauses?
  • Can you comply with return/destruction requirements?
  • Is the governing law and jurisdiction acceptable?
  • Are the remedies balanced for both parties?

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⚠️ This guide is for educational purposes only and does not constitute legal advice. For important contracts, consult with a qualified attorney.