Business encyclopedia

Learn everything there is to know about running a business

Non-disclosure Agreement (NDA)

What is a Non-disclosure Agreement (NDA)?

A non-disclosure agreement (NDA), sometimes referred to as a confidentiality agreement, is a written contract between two parties (people or organizations) that prohibits the sharing of confidential information that has been revealed to them. In a nutshell, if you are asked to sign an NDA, you are promising to keep secret any sensitive information shared with you and not share it with others. If you are the issuer of the NDA, you are asking someone else not to share any information you might share with them.

There are two general types of NDAs:

  1. Unilateral - where one party agrees not to reveal information provided by another party. Most agreements fall into this category, such as with employers and employees or clients and vendors.
  2. Mutual - used typically when companies are exploring a potential relationship, such as a partnership, collaboration, merger, or purchase, and both sides need to share sensitive information with the other in order to make decisions about that relationship. These are less common.

The purpose of the NDA is to prevent business confidential information from becoming public knowledge. For example, if an independent contractor came across the secret formula for Coca-Cola®, they would be prohibited from telling anyone else without serious repercussions (meaning a major lawsuit costing too many dollars to count).

Generally, NDAs are signed at the start of a business relationship, such as when an employee is hired. They can also be signed at the conclusion, such as when a partner has decided to leave, but they may be harder to negotiate at that point.

Key Clauses

Some of the key sections of an NDA include, but are not limited to:

  • Identifying who the parties are that are signing the agreement
  • Defining exactly what is considered confidential information protected by the agreement, and what is not considered confidential (such as publicly-available reports or information shared by someone else)
  • Explaining why the information is being shared now, for what purpose
  • Clarifying exactly how the shared information can and can’t be used, such as not being able to be used for any purpose other than that which has been stated (called a “no use” clause)
  • Setting the timeframe or duration of the agreement

When Your NDA Has Been Violated

If you discover or suspect that trade secrets or confidential information covered by an NDA have been shared publicly, it is important to act quickly to gather evidence of how the information was leaked, who has it, and what it being done with it, as well as who is responsible. The first step is hiring an attorney familiar with intellectual property.


You may also be interested in: