A Non-Disclosure Agreement (NDA), also known as a confidentiality agreement, is a contract between two parties where one shares sensitive information and the other party promises to keep it confidential. Confidential information is often sensitive, technical, commercial, or valuable in nature (e.g., trade secrets or proprietary information).
Both parties sign the Confidentiality Agreement, creating a binding contract to keep the information secret. Be sure you understand how to write an NDA before drafting your own.
Types of Non-Disclosure Agreements
What is the Purpose of a Non-Disclosure Agreement?
A Non-Disclosure Agreement aims to prevent confidential information from being publicly disclosed or used by any parties you share information with.
A signed NDA sets the legal framework to protect intellectual property and information from being stolen, sold, or shared with third parties, such as business competitors.
An NDA is typically used to:
- To protect sensitive information – If you or your company need to protect sensitive data, you can use an NDA, so participants are legally bound not to divulge or release the information to other parties.
- Protect patent rights – If you intend to share trade secrets, you must take reasonable steps to protect their confidentiality. An NDA is an appropriate step.
- Outline what information is confidential – An NDA classifies exclusive and personal information to avoid confusion.
Examples of situations when a company uses an NDA:
- In-depth business discussions
- Hiring employees, freelancers, or contractors
- Working with potential investors
- Supplementing other agreements (such as a manufacturing agreement)
How to Write a Non-Disclosure Agreement
Here is a walkthrough on how to create and fill out an NDA, what are the standard clauses you should include, and what they mean:
Step 1 – Disclosing and Receiving Parties
Start your NDA by establishing the “Parties” to the agreement. The “Disclosing Party” is the individual or entity sharing information. At the same time, the “Receiving Party” is the individual or entity receiving information.
Confidential information has been shared in a mutual NDA (a bilateral NDA). In this agreement, both parties serve as the Disclosing and Receiving Parties.
Here’s an example of how to start an NDA and establish the Parties to the agreement. Notice that the sample NDA clause also specifies what transaction or relationship the NDA relates to:
Step 2 – Confidential Information
After the Parties have been established, specify what the Non-Disclosure Agreement protects confidential information.
Common examples of NDA-protected confidential information include:
- Special formulas
- Software development
- Technical designs
- Customer lists
- Patent details
- Affiliate deals
- Real Estate
- Advertising and marketing
- Pricing structures
- Business and financial records
- Documentary, TV, film, and news production
- Illustrations, graphic design, and drawings
- Web design
- Inventions, prototypes, or product samples
- Visitor or factory tours
- Bachelor or bachelorette parties
- Celebrity meet-and-greets
- House tours
- Original artwork
These are only a few examples of the types of information you wish to keep confidential under the protection of your NDA. Your agreement can list as many or as few confidential information as needed. Still, it would help if you were specific about what information the Receiving Party cannot disclose.
Being specific about what your NDA protects information will help it stand up in court in a legal dispute.
Step 3 – Exclusions from Confidential Information
An “Exclusions” clause defines what information the NDA does not protect.
Information that a Non-Disclosure Agreement can’t protect includes:
- information already in the public domain
- information the other party already has access to before the NDA
- information that is independently developed or discovered by the recipient
- information that the Disclosing Party has authorized the Receiving Party to share with the prior written consent
Oral information can be deemed confidential if confirmed in writing within a specific time frame after being disclosed.
Here’s an example of what your Exclusions clause should look like:
Step 4 – Non-Disclosure Obligations
The bulk of your NDA will comprise Non-Disclosure Obligations, which outline the Receiving Party’s obligations to the Disclosing Party’s information.
Rather than being a single clause, this section will likely comprise multiple clauses that detail various obligations.
This section will start with a clause like in the example below, which states the general obligation of the Receiving Party to keep the confidential information quiet.
Depending on your needs, you can add additional clauses to this section of your NDA. Here are some other provisions you may choose to include in your Non-Disclosure Obligations section:
1. Non-Disclosure of Transaction: the Receiving Party promises not to let others know that:
- The Disclosing Party has shared or used Confidential Information.
- a Transaction is being discussed or negotiated.
- a Transaction has taken place, including the details of the relationship.
2. Non-Solicitation: either party may prevent the other from soliciting or offering employment to the other party’s employees or diverting business from the other party.
3. Non-compete: Parties agree not to engage in business activities directly competing with the other party. Many companies have partners and employees sign NDAs and non-compete agreements separately.
4. Non-Circumvention: if the Disclosing Party shares business contacts, a non-circumvention clause prevents the Receiving Party from bypassing the agreement and directly doing business or engaging with those contacts.
In the NDA sample below, you can see how these clauses may look in an agreement:
You may include only a few examples of Obligation clauses in your NDA.
Step 5 – Time Frame / Termination
The NDA should explicitly state how long it remains in effect. The Time Frame includes when the promise to keep confidential information secret begins (the “Effective Date“) and the duration in which the protected information must not be shared with others (the “Disclosure Period“).
Usually, the Parties agree to when the term of the agreement will end (known as the “Termination” provision). For example, the Non-Disclosure Agreement could terminate when:
- the Agreement expires
- the Transaction is completed; or
- a specific period has passed.
Step 6 – Jurisdiction
The Jurisdiction clause establishes which state’s laws govern the Confidentiality Agreement. Suppose confidential information is leaked or inappropriately used by one party, and a lawsuit ensues. In that case, the laws of the agreed-upon state will apply, and any trials or hearings will occur there.
Step 7 – Signatures
Finally, your NDA needs to include the signatures of all Parties and their Representatives.
Representatives are other people (i.e., directors, officers, employees, agents, or advisors) who may share, receive, or protect the information in pursuit of the Transaction specified in the NDA.
Here’s an example of the Disclosing Party’s signature section:
Directly below this is the Receiving Party’s signature section, which is identical.
Step 8 – Additional Clauses
Every NDA will look different depending on the nature of the transaction, relationship, and information being specified. There are additional clauses you may choose to include in your Confidentiality Agreement:
- Remedies: stipulates the consequences of breaking the NDA
- No License: provides that the NDA doesn’t give either party any patent, copyright, or ownership of the information provided.
- Severability: states that if one part of the NDA is ruled invalid in court, that part will be removed, and the rest of the agreement remains valid.
- Amendments: notes that the NDA may be amended at any time.
Sample Non-Disclosure Agreement
The following confidentiality agreement sample is an excellent example of how you can structure your basic NDA agreement template. You can also check out our other NDA templates for samples.
Frequently Asked Questions
Your Non-Disclosure Agreement is applicable as long as you agree with the other party/parties involved. Typically, a standard NDA ranges from one to five years; however, depending on the information to be kept confidential, an NDA can be indefinite.
The primary difference between a non-compete and a non-disclosure agreement is the business activities they intend to restrict.
- A non-compete agreement prohibits one party from doing business that competes with the other party. For instance, it prevents one party from hiring the other’s employees and business contacts and working with competing companies.
- A non-disclosure agreement prevents one or both parties from using or leaking sensitive information learned in negotiations or business relationships.
These documents get confused because non-disclosure agreements often include a non-compete clause. Businesses bundle the non-compete clause into the non-disclosure agreement because it’s easier to sign one document than two.
There is no difference between a non-disclosure agreement (NDA) and a confidentiality agreement. Non-disclosure and confidentiality agreements protect confidential information from being shared with third parties.
In other words, these documents’ titles come down to preference because they both serve the same legal function. Some other names people use interchangeably with confidentiality and non-disclosure agreements include:
- Secrecy Agreement
- Confidential Disclosure Agreement (CDA)
- Proprietary Information Agreement (PIA)
You may see a non-disclosure or confidentiality clause in other legal documents. For example, most independent contractor agreements outline the terms of a project and include a clause stating that any information shared is confidential.
You should not handwrite an NDA. Handwritten contracts are often dismissed in court because they are messy or incomplete. Always write NDAs digitally and print them out if you need a physical copy.