What is a non-disclosure agreement?
A non-disclosure agreement (NDA) is a written contract in which two parties, the Disclosing Party and the Receiving Party, agree not to disclose certain proprietary or confidential information explicitly outlined in the agreement. The Disclosing and Receiving Parties can be individuals, companies, or entities.
By agreeing that such information is sensitive, technical, or valuable for commercial or other purposes, both parties can safely explore starting a business relationship without fear of having sensitive information leak.
Non-disclosure agreements are referred to by many different names, but all share the same meaning:
- Confidentiality Agreement (CA)
- Confidential Disclosure Agreement (CDA)
- Proprietary Information Agreement (PIA)
- Secrecy Agreement (SA)
Do you need a non-disclosure agreement?
If you want to enter a business relationship, and have sensitive or valuable trade secrets or intellectual property, you need an NDA.
All successful companies, from small businesses to international corporations, need to protect the proprietary information that enables them to thrive — and prevent the disclosure of confidential information. For instance, KFC’s secret recipe is heavily guarded by a strict NDA.
I need an NDA, but should it be specific to my situation?
You can use a specific non-disclosure agreement for various scenarios. The following examples cover a few of the most common confidential relationships which call for an NDA:
Use an employee NDA to forbid employees from sharing sensitive business information — except when appropriate — or risk breaching their contracts. Some companies make this agreement standard for all employees.
Use an interview NDA when it’s necessary to reveal confidential information in order to attract employees — usually high-level ones. It should be signed before the job interview.
Use an inventor NDA to protect unpatented inventions. When it’s necessary to share information about an invention with other engineers, investors, or even family members, this NDA ensures that nobody can easily disclose or steal the information.
Real Estate NDA
Use a real estate NDA to protect the personal and financial information of the buyer, seller, broker, and anyone else involved in a property transaction. This form of NDA also prevents involved parties from brokering secret deals, or leaking sensitive material to competing property owners.
Trade Secret NDA
Use a trade secret NDA to safely disclose trade secrets to third parties without fear of theft. Trade secrets are often items like special formulas, practices, instruments, software, technical designs, blueprints, and customer lists — but they can also be unique and unusual.
The following examples can all be covered by NDAs:
- Documentary Films
- Advertising Agencies
- Website Development
- Visitor or Factory Tours
- Bachelorette / Bachelor Parties (Yes, seriously.)
- TV Productions
- Software Development
This is by no means a comprehensive list — the key is understanding that the language of your NDA can be modified to fit your specific business situation. However, in terms of how your NDA functions, you’ll need to choose whether your confidential relationship is mutual or unilateral.
Mutual vs. unilateral non-disclosure agreements
There are two main types of non-disclosure agreements — mutual and unilateral. Our non-disclosure agreement legal document builder can help you create both types.
Mutual Non-Disclosure Agreement
In a mutual NDA (aka two way or bilateral NDA), information is shared in two directions.
- Both parties disclose and receive valuable information
- Both parties promise to protect the information
Example: Two CEOs exploring becoming business partners need to share sensitive financial information. To safely do so, both sign a mutual NDA.
Unilateral Non-Disclosure Agreement
In a unilateral NDA, information is shared in one direction.
- Only one party (the Disclosing Party) shares valuable information
- Only one party (the Receiving Party) agrees to protect the information, and not to share or steal it
Example: An inventor needs share valuable information about her invention to a potential investor, but wants to protect it. The investor, having none of his own information to protect, would sign a unilateral NDA.
CDA vs. NDA: Is there a difference between a non-disclosure agreement and confidentiality agreement?
There’s no difference between a confidentiality agreement and a non-disclosure agreement. Regardless of what you call them — CDAs, SAs, NDAs, etc. — all attempt to legally protect sensitive information like trade secrets from being leaked to a third party.
Some contracts contain confidentiality or non-disclosure clauses that perform the same function as a standalone non-disclosure agreement. It’s common to see such clauses in:
- Joint Venture Agreements
- Employment Contracts
- Freelance Contracts
- Independent Contractor Agreements
- Non-Compete Agreements
What about non-disclosure agreements vs. non-compete agreements?
Whereas a non-disclosure agreement can broadly protect confidential information, a non-compete agreement is more specific — an employee agrees not to enter into competition with their current employer. They prohibit competitive practices such as the employee soliciting their employer’s customers, or working with competing businesses.
Download a Free Non-Disclosure Agreement Template
Download this blank and fillable NDA template into MS Word, or simply click on the document if you’d like to view the individual clauses in more detail. To save time, we recommend using our free non-disclosure agreement builder.
Wondering how to fill in your non-disclosure agreement, and what the legal document should look like when it’s completed? You can view our generic non-disclosure agreement sample PDF to get an idea.
Non-Disclosure and Confidentiality Agreement
This Non-Disclosure and Confidentiality Agreement (this “Agreement”) is entered into as of the __________ day of __________, __________ (the “Effective Date”) by and between __________ as an Individual (“__________”) and __________ as an Individual (“__________”).
__________ and __________ have indicated an interest in exploring a potential business relationship (the “Transaction”). In connection with its respective evaluation of the Transaction, each party, their respective affiliates and their respective directors, officers, employees, agents or advisors (collectively, “Representatives”) may provide or gain access to certain confidential and proprietary information. A party disclosing its Confidential Information to the other party is hereafter referred to as a “Disclosing Party.” A party receiving the Confidential Information of a Disclosing Party is hereafter referred to as a “Receiving Party.” In consideration for being furnished Confidential Information, __________ and __________ agree as follows:
- Confidential Information. The term “Confidential Information” as used in this Agreement shall mean any data or information that is competitively sensitive material and not generally known to the public, including, but not limited to, information relating to any of the following: which the Disclosing Party considers confidential.
- Exclusions from Confidential Information. The obligation of confidentiality with respect to Confidential Information will not apply to any information:
- If the information is or becomes publicly known and available other than as a result of prior unauthorized disclosure by Receiving Party or any of its Representatives;
- If the information is or was received by Receiving Party from a third party source which, to the best knowledge of Receiving Party or its Representatives, is or was not under a confidentiality obligation to Disclosing Party with regard to such information;
- If the information is disclosed by Receiving Party with the Disclosing Party’s prior written permission and approval;
- If the information is independently developed by Receiving Party prior to disclosure by Disclosing Party and without the use and benefit of any of the Disclosing Party’s Confidential Information; or
- If Receiving Party or any of its Representatives is legally compelled by applicable law, by any court, governmental agency or regulatory authority or by subpoena or discovery request in pending litigation but only if, to the extent lawful, Receiving Party or its Representatives give prompt written notice of that fact to Disclosing Party prior to disclosure so that Disclosing Party may request a protective order or other remedy to prevent or limit such disclosure and in the absence of such protective order or other remedy, Receiving Party or its Representatives may disclose only such portion of the Confidential Information which it is legally obligated to disclose.
- Obligation to Maintain Confidentiality. With respect to Confidential Information:
- Receiving Party and its Representatives agree to retain the Confidential Information of the Disclosing Party in strict confidence, to protect the security, integrity and confidentiality of such information and to not permit unauthorized access to or unauthorized use, disclosure, publication or dissemination of Confidential Information except in conformity with this Agreement;
- Receiving Party and its Representatives shall adopt and/or maintain security processes and procedures to safeguard the confidentiality of all Confidential Information received by Disclosing Party using a reasonable degree of care, but not less than that degree of care used in safeguarding its own similar information or material;
- Upon the termination of this Agreement, Receiving Party will ensure that all documents, memoranda, notes and other writings or electronic records prepared by it that include or reflect any Confidential Information are returned or destroyed as directed by Disclosing Party;
- If there is an unauthorized disclosure or loss of any of the Confidential Information by Receiving Party or any of its Representatives, Receiving Party will promptly, at its own expense, notify Disclosing Party in writing and take all actions as may be necessary or reasonably requested by Disclosing Party to minimize any damage to the Disclosing Party or a third party as a result of the disclosure or loss; and
- The obligation not to disclose Confidential Information shall survive the termination of this Agreement, and at no time will Receiving Party or any of its Representatives be permitted to disclose Confidential Information, except to the extent that such Confidential Information is excluded from the obligations of confidentiality under this Agreement pursuant to Paragraph 2 above.
- Non-Disclosure of Transaction. Without Disclosing Party’s prior written consent, neither Receiving Party nor its Representatives shall disclose to any other person, except to the extent, the provisions of Paragraph 2 apply: (a) the fact that Confidential Information has been made available to it or that it has inspected any portion of the Confidential Information; (b) the fact that Disclosing Party and Receiving Party are having discussions or negotiation concerning the Transaction; or (c) any of the terms, conditions or other facts with respect to the Transaction.
- Representatives. Receiving Party will take reasonable steps to ensure that its Representatives adhere to the terms of this Agreement. Receiving Party will be responsible for any breach of this Agreement by any of its Representatives.
- Disclaimer. There is no representation or warranty, express or implied, made by Disclosing Party as to the accuracy or completeness of any of its Confidential Information. Except for the matters set forth in this Agreement, neither party will be under any obligation with regard to the Transaction. Either party may, in its sole discretion: (a) reject any proposals made by the other party or its Representatives with respect to the Transaction; (b) terminate discussions and negotiations with the other party or its Representatives at any time and for any reason or for no reason; and (c) change the procedures relating to the consideration of the Transaction at any time without prior notice to the other party.
- Remedies. Each party agrees that use or disclosure of any Confidential Information in a manner inconsistent with this Agreement will give rise to irreparable injury for which: (a) money damages may not be a sufficient remedy for any breach of this Agreement by such party; (b) the other party may be entitled to specific performance and injunction and other equitable relief with respect to any such breach; (c) such remedies will not be the exclusive remedies for any such breach, but will be in addition to all other remedies available at law or in equity; and (d) in the event of litigation relating to this Agreement, if a court of competent jurisdiction determines in a final non-appealable order that one party, or any of its Representatives, has breached this Agreement, such party will be liable for reasonable legal fees and expenses incurred by the other party in connection with such litigation, including, but not limited to, any appeals.
- Notices. All notices given under this Agreement must be in writing. A notice is effective upon receipt and shall be sent via one of the following methods: delivery in person, overnight courier service, certified or registered mail, postage prepaid, return receipt requested, addressed to the party to be notified at the below address or by facsimile at the below facsimile number or in the case of either party, to such other party, address or facsimile number as such party may designate upon reasonable notice to the other party.
__________, NY, __________
Phone number: __________
Fax number: __________
__________, NY, __________
Phone number: __________
Fax number: __________
- Termination. This Agreement will terminate on the earlier of: (a) the written agreement of the parties to terminate this Agreement; (b) the consummation of the Transaction; or (c) __________ __________ from the date hereof.
- Amendment. This Agreement may be amended or modified only by a written agreement signed by both of the parties.
- Jurisdiction. This Agreement will be governed by and construed in accordance with the laws of the State of New York, without regard to the principles of conflict of laws. Each party consents to the exclusive jurisdiction of the courts located in the State of New York for any legal action, suit or proceeding arising out of or in connection with this Agreement. Each party further waives any objection to the laying of venue for any such suit, action or proceeding in such courts.
- Miscellaneous. This Agreement will inure to the benefit of and be binding on the respective successors and permitted assigns of the parties. Neither party may assign its rights or delegate its duties under this Agreement without the other party’s prior written consent. In the event that any provision of this Agreement is held to be invalid, illegal or unenforceable in whole or in part, the remaining provisions shall not be affected and shall continue to be valid, legal and enforceable as though the invalid, illegal or unenforceable parts had not been included in this Agreement. Neither party will be charged with any waiver of any provision of this Agreement, unless such waiver is evidenced by a writing signed by the party and any such waiver will be limited to the terms of such writing.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.
In our sample NDA between two small businesses, it’s agreed that the Receiving Party won’t disclose any information regarding the Disclosing Party’s marketing documentation, reports, strategies, designs, customer relationships, and business plans for the future.
What Should be Included in a Standard NDA?
When writing a standard Non-Disclosure Agreement, it’s important to identify the following basic elements.
Receiving and Disclosing Parties
Your NDA should describe the “Parties” to the agreement. The “Disclosing Party” is the individual or entity sharing information, while the “Receiving Party” is the individual or entity receiving information.
Both parties must sign and date the document for it to become legally binding.
|This Non-Disclosure and Confidentiality Agreement (this “Agreement”) is entered into as of the __________ day of __________, __________ (the “Effective Date”) by and between __________ as an Individual (“__________”) and __________ as an Individual (“__________”).|
Transaction and Representatives
“Transaction” refers to the potential business relationship being explored, and “Representatives” are other people (i.e., directors, officers, employees, agents or advisors) who may share, receive, or protect information in pursuit of the Transaction.
|__________ and __________ have indicated an interest in exploring a potential business relationship (the “Transaction”). In connection with its respective evaluation of the Transaction, each party, their respective affiliates and their respective directors, officers, employees, agents or advisors (collectively, “Representatives”) may provide or gain access to certain confidential and proprietary information.|
“Confidential Information” defines what’s protected in the NDA, the reason why it’s being shared, and the use of the confidential information.
|1. Confidential Information. The term “Confidential Information” as used in this Agreement shall mean any data or information that is competitively sensitive material and not generally known to the public, including, but not limited to, information relating to any of the following: [insert categories here] which the Disclosing Party considers confidential.|
What categories of confidential information could you include in your NDA? It could be private, secret, sensitive, or valuable data, such as:
By nature, some information can’t be protected in a non-disclosure agreement, such as:
- information already in the public domain
- information the other party already has access to prior to 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 prior written consent
“Exclusions” define what kind of information is NOT protected by the agreement and can be shared with permission from the Disclosing Party.
Can information communicated orally be considered Confidential Information?
Generally, oral information is deemed Confidential Information, as long as it’s confirmed in writing within a specific timeframe after being disclosed.
Timeframe (or Termination)
The NDA should explicitly state the NDA’s time period. This 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 (the “Termination” provision). For example, the non-disclosure agreement could terminate whenever:
- the Agreement expires
- the Transaction is completed; or
- a specific time period has passed.
|9. Termination. This Agreement will terminate on the earlier of: (a) the written agreement of the parties to terminate this Agreement; (b) the consummation of the Transaction; or (c) __________ __________ from the date hereof.|
Can an NDA have no termination date and never expire?
Depending on the nature of the confidential information, you can include a clause that requires perpetual confidentiality. This means that there’s no termination date, and lasts forever. Generally speaking, ordinary confidential information should have a stated time limitation, but trade secrets, like a secret recipe, should have perpetual confidentiality.
However, your NDA’s perpetual timeframe may not hold up in court depending on the jurisdiction where it’s enforceable. We advise you to speak to a lawyer if you’re thinking of adding a perpetual confidentiality clause.
“Jurisdiction” defines where the non-disclosure agreement applies. If Confidential Information is leaked or inappropriately used by one party and a disagreement turns into a lawsuit, the parties should agree that the laws of one state will apply. In other words, both parties consent to appear in a specific state.
|11. Jurisdiction. This Agreement will be governed by and construed in accordance with the laws of the State of __________, without regard to the principles of conflict of laws.|
Do state laws differ on NDAs?
The state laws that govern NDAs vary, so you need to be careful where your NDA calls for jurisdiction. For instance, California laws disfavor non-compete clauses (also known as a “covenant not to compete” or CNC), as well as employer agreements that restrict an employee’s mobility after leaving one company.
Other common NDA clauses, terms, and provisions
Disclaimer: the protected information is provided “as is” and is not necessarily accurate or complete
No License: the Agreement does not give either party any patent, copyright, or other right to the information provided
Non-Disclosure: the Receiving Party promises to not 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
No Obligation: either party may,
- reject any proposals related to the business relationship
- walk away from negotiations at any time and for any or no reason
Obligations: the Receiving Party and its Representatives promise to,
- not share or use the protected information with others
- protect the security and confidentiality of the protected information
- prevent any unauthorized disclosure, access, or use of the information
- reasonably safeguard the information’s confidentiality (“need to know”)
- return or destroy any documents after the Agreement ends
- tell the Disclosing Party ASAP if the protected information is shared, lost, or such disclosure is required by law or court order
Remedies: if either party breaks any provision of this Agreement,
- no amount of money may be enough to make it ever “right” again
- the injured party may take legal action and ask the court to order the other party to do something (for example, court orders like: specific performance, injunctive relief, or equitable relief)
- the injured party may take legal action to go after both monetary and non-monetary damages
- whoever is in the wrong will need to pay for attorney fees
Non-Solicitation: either party may prevent the other from soliciting or offering employment to the other party’s employees, or from diverting business away from the other party
Non-Circumvention Clause: if the Disclosing Party is sharing business contacts, this clause prevents the Receiving Party from bypassing the agreement and directly doing business or engaging with those contacts
Notice: if at any time one party needs to tell the other something important (i.e., their computers were hacked and the Confidential Information was stolen or someone has sued them in court), then such notices should be sent to a certain person, email address, or mailing address
Delivery: You may also require that such notices be delivered by a certain method, such as,
- Delivery in person
- Overnight courier service
- Certified or registered mail
- Prepaid postage
- Return receipt
Frequently Asked Questions about NDAs
Can I terminate an NDA early?
You can terminate an NDA early if:
- you provide notice to the other party, and they agree to an early termination,
- the other party has misrepresented critical details in the business relationship, or
- there’s been a crime.
Otherwise, you’re obligated to remain bound by the NDA until the agreed upon end date.
Can I legally break an NDA?
Similar to terminating an NDA early, you can legally break an NDA if:
- the other party has misrepresented critical details in the business relationship, or
- there’s been a crime.
However, it’s best to first consult with a lawyer and get legal advice before taking any drastic actions.
What if my NDA is violated?
If someone breaks your non-disclosure agreement, enforcing it can be a hassle that often requires an expensive and messy litigation process. Depending on your case, there are few legal claims that you can make, such as:
- Misappropriation of trade secrets
- Breach of fiduciary duty
- Copyright infringement
- Patent infringement
- Racketeer Influenced and Corrupt Organizations Act (RICO)
Hopefully, the court will rule in your favor and order an injunction, which will require the breaching party to stop disclosing the information.
Should I sign an NDA?
For the most part, signing an NDA shouldn’t be an issue — they’re common documents in the business world. But we recommend that you study and answer the following questions before signing:
- What type of information are you required to keep confidential?
- What steps must you take to keep it confidential?
- How long will the NDA last?
- Does it have overly broad language?
- What are the consequences if I breach it?
- Should I try to negotiate any of its terms, such as reducing the timeframe?