What Is an NDA

Definition and purpose

A non-disclosure agreement (NDA) is a contract that sets the terms under which one party (the Discloser) shares information with another (the Disclosee). Its core promise is simple: keep the information secret and use it only for a defined Purpose. NDAs appear in sales discussions, fundraising, vendor diligence, M&A, and hiring.

Structure and parties

NDAs are either unilateral (one-way) or mutual (two-way). If only one party will disclose information, use a unilateral NDA; if both parties expect to disclose, use a mutual NDA. Mutual NDAs impose reciprocal confidentiality and use obligations on both sides. State clearly who is the Discloser and who is the Disclosee. If affiliates, advisors, or other Representatives will handle the data, include them expressly and bind them to the same duties, either directly or through responsibility for their compliance.

Consideration

Every contract needs consideration—something of value exchanged. In an NDA, that is access to valuable information and the chance to evaluate a potential deal. In mutual NDAs, reciprocal promises to protect each side’s information also supply consideration.

Scope of confidentiality

Define Confidential Information by subject and form. It can be written, oral, or visual. Many NDAs require marking disclosures as confidential, but oral or visual disclosures are often protected if confirmed in writing within a set time. Clarify that summaries, notes, and analyses derived from the data are covered.

Exclusions and exceptions

Confidentiality does not cover information that is public, independently developed, already known without restriction, or rightfully received from another source. If disclosure is compelled by a court or government, the Disclosee may disclose what is required, ideally with prompt notice to the Discloser if permitted by law.

Purpose limitation

Limit use to the stated Purpose—for example, evaluating a potential partnership—and forbid competitive or other unrelated use. The narrower and clearer the Purpose, the easier it is to administer and enforce. NDAs control use, not ownership; rights remain with the Discloser unless otherwise stated.

Duration of obligation

Set how long confidentiality and use restrictions last. Some NDAs use a fixed term (for example, two to five years). Others protect certain categories, such as trade secrets, indefinitely. Align the term with the sensitivity and commercial half-life of the information.

Return or destruction of information

On request or at the end of discussions, the Disclosee should return or destroy Confidential Information. Address practical realities: routine backups, archival media, and legal holds may delay or limit deletion. NDAs often allow retention of one copy for compliance. Certification of destruction may be required.

Remedies and enforcement

A breach does not guarantee money damages that are easy to prove. NDAs often allow the Discloser to seek injunctive relief to stop misuse. Liquidated damages clauses are uncommon in NDAs and can be challenged. Fee-shifting provisions vary; some award fees to the prevailing party, others are silent.

Governing law and jurisdiction

Specify the governing law and where disputes will be resolved. Keep these choices consistent with related agreements between the parties. If disputes are likely to be urgent, consider forums that can grant quick equitable relief. Cross-border deals may require neutral law and venue. Parties may also require mediation as a first step and arbitration for final resolution; carve-outs for injunctions can coexist with arbitration.

Practical notes

NDAs are preventive tools. Overbreadth—vague definitions, unlimited Purpose, or sweeping no-hire terms—can undermine enforceability and trust. Precision helps: define what is protected, who may see it, why it is shared, and for how long. Reasonable carve-outs and terms signal seriousness without chilling cooperation.

Bottom line

An NDA sets guardrails for sharing. Make clear what is protected, the Purpose for sharing, permitted uses, how long obligations last, and what happens to the information at the end. Clarity and proportionality make NDAs easier to manage and more likely to be enforced.