Non-Disclosure Agreement (NDA)
A non-disclosure agreement (NDA) is a legally binding contract that establishes a confidential relationship between parties. The party or parties sharing information agree that sensitive material will not be disclosed to unauthorized third parties. NDAs are commonly signed before business discussions, partnership negotiations, or project engagements where proprietary information, trade secrets, or strategic plans will be shared. There are two main types: a one-way NDA, where only one party discloses confidential information, and a mutual NDA, where both parties share and protect each other's information. Key clauses in an NDA include the definition of confidential information, the obligations of the receiving party, exclusions from confidentiality (such as publicly available information), the duration of the obligation, and remedies for breach. NDAs are standard practice in industries ranging from technology and finance to creative services. While they do not prevent information theft, they create a legal framework for recourse if a breach occurs.
Example
Before sharing product roadmap details with a potential development partner, a SaaS company asks them to sign a mutual NDA covering all information exchanged during the evaluation period.
Frequently asked questions
- What is the difference between a mutual and a one-way NDA?
- A one-way NDA protects information shared by only one party, typically used when a company discloses information to a contractor or vendor. A mutual NDA protects information shared by both parties, which is more common in partnerships, joint ventures, or evaluations where both sides reveal sensitive material.
- How long does an NDA last?
- NDA durations vary, but most specify a confidentiality period of one to five years. Some NDAs remain in effect indefinitely for trade secrets. The duration should be clearly stated in the agreement and should reflect how long the information remains commercially sensitive.
- Can you negotiate the terms of an NDA?
- Yes. Common negotiation points include narrowing the definition of confidential information, limiting the duration, adding carve-outs for information the receiving party already knew, and specifying which jurisdiction's laws govern the agreement. Both parties should review the terms before signing.