What is a non-disclosure agreement?
A non-disclosure agreement (NDA), also called a confidentiality agreement, is a contract in which one or both parties agree to keep certain information secret. It's used before sharing sensitive information like a business plan, customer list, product idea, or trade secret. The recipient is legally bound not to disclose or misuse it.
An NDA can be unilateral (one party discloses and the other must keep it secret) or mutual (both share and both are bound). A good NDA clearly defines what's confidential, carves out exclusions (public information, what the recipient already knew), sets the term, limits how the information may be used, and spells out what happens on a breach.
When do you need one?
Sharing a business idea, plan, or financials with a potential partner or investor
Hiring an employee or contractor who'll access sensitive information
Exploring a business sale or merger (due diligence)
Discussing an invention or product before it's protected
Working with a vendor who'll handle confidential data
Any conversation where you need to protect trade secrets first
What it should include
Parties — the disclosing and receiving parties
Confidential information — a clear definition of what's protected
Exclusions — what isn't covered — public info, prior knowledge, independently developed
Permitted use — what the recipient may (and may not) do with it
Term — how long the obligation lasts
Return / destruction — returning or destroying materials when it ends
Remedies — injunction and damages for a breach
Signatures — both parties', dated
Mutual vs. unilateral
Use a unilateral NDA when only one side is disclosing — say, you're pitching an idea to a company. Use a mutual NDA when both sides will share confidential information, like two businesses exploring a partnership. Mutual NDAs feel fairer and are common when the relationship is two-way.
How long should an NDA last?
Confidentiality terms commonly run 2-5 years, but it depends on the information. Genuine trade secrets can be protected indefinitely, as long as they stay secret, while time-sensitive business information may only need a couple of years. Match the term to how long the information stays valuable.
Common mistakes to avoid
Vague definition of what's actually confidential
Leaving out standard exclusions, making the NDA overbroad and hard to enforce
No time limit, or an unreasonably long one that a court may not enforce
Signing after information was already shared
No remedy or return-of-materials clause
Using a one-way NDA when both sides are sharing