Non-disclosure agreement
A non-disclosure agreement (NDA) is a stand-alone contract in which one or both parties promise to keep shared information confidential.
What it means
An NDA is a short contract signed before sensitive information changes hands, often at the start of talks about a possible deal, investment, hire or partnership. It does the same job as a confidentiality clause, but as its own document. It typically defines what is confidential, what the recipient may do with it, the exceptions, and how long the promise lasts.
A common example is a software startup pitching a larger company on a reseller partnership. Before showing its product roadmap, the startup asks the prospect to sign an NDA. If the talks fall apart, the prospect still cannot use the roadmap or pass it along, and the startup has a clear contract to point to if it does.
A one-way (unilateral) NDA protects only the party disclosing information, while a mutual NDA protects both. Many companies use their own standard form, which tends to favor them. NDAs are also sometimes loaded with terms that have nothing to do with confidentiality, such as non-solicitation promises or ownership of ideas, so the whole document is worth reading even though it looks routine.
What to watch for
- Check whether the NDA is mutual or one-way, and whether that matches who is actually sharing information.
- Look for terms that go beyond confidentiality, such as non-solicitation, non-compete, or ownership of ideas and feedback.
- Confirm how long the confidentiality duty lasts and whether it continues after talks end or the NDA is terminated.
- Check whether the NDA confirms that either side can still build similar products independently, which matters if you work in the same field.
- See which state’s law applies and where disputes must be brought, since this affects how costly it is to enforce or defend a claim.
Example clause
The Recipient will hold the Discloser’s Confidential Information in strict confidence, will use it solely to evaluate a potential business relationship between the parties, and will not disclose it to anyone other than its representatives who need to know it for that purpose. Nothing in this Agreement obligates either party to proceed with any transaction.
You can use what you learn only to decide whether to do the deal, and signing does not commit either side to doing it.