A Non-Disclosure Agreement (NDA) is one of the most commonly used legal documents in business — and one of the most misunderstood. Here’s exactly what an NDA needs to include and how to get one right without a $500/hour attorney.
What Is an NDA?
An NDA (also called a confidentiality agreement) is a legally binding contract between two or more parties that establishes a confidential relationship. The party or parties who sign it agree not to disclose certain information they’ve been given access to.
One-Way vs. Mutual NDAs
A one-way (unilateral) NDA flows in one direction: one party discloses information, and the other party agrees not to share it. Use this when you’re sharing your idea or proprietary information with an investor, contractor, or employee.
A mutual (bilateral) NDA protects both parties. Use this when both sides will be sharing confidential information — such as in a potential partnership or acquisition discussion.
What Every NDA Must Include
1. Definition of Confidential Information
Be specific about what information is covered. Vague definitions create loopholes. Include business plans, financial data, trade secrets, customer lists, product designs, and any other categories relevant to your situation.
2. The Parties
Clearly identify who is disclosing information (the Disclosing Party) and who is receiving it (the Receiving Party). Include full legal names and any relevant entity information.
3. Obligations of the Receiving Party
State clearly what the receiving party must do (keep information confidential) and what they cannot do (share with third parties, use for competitive purposes, etc.).
4. Exclusions
Standard NDA exclusions include information that is already publicly known, information the receiving party already had before the disclosure, and information that becomes public through no fault of the receiving party.
5. Term
How long does the agreement last? Common terms are 2–5 years. For trade secrets, consider indefinite protection.
6. Remedies
Include language stating that a breach of the NDA may cause irreparable harm and that the disclosing party is entitled to injunctive relief in addition to other legal remedies.
7. Governing Law
Specify which state’s law governs the agreement. In Texas, you’d include Texas as the governing jurisdiction.
Common NDA Mistakes to Avoid
- Being too vague about what counts as confidential information
- Forgetting to include a term — an NDA without an end date can create complications
- Using a one-way NDA when both parties are sharing sensitive information
- Not getting it signed before any disclosure, not after
Download a Professional NDA Template
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