When do you need an NDA?
A non-disclosure agreement (NDA) protects sensitive information shared between parties. Here are common situations where you should use one:
Before pitching to clients
If you are sharing proprietary methodologies, pricing structures, or strategic approaches during a pitch, an NDA prevents prospects from sharing your ideas with competitors.
Hiring contractors or employees
When bringing new people into your business, an NDA protects client lists, business processes, and other confidential information they will have access to.
Partnership discussions
Exploring a business partnership often requires sharing financial data, customer information, or trade secrets. An NDA ensures both parties keep this information private.
Investor meetings
When pitching to investors, you may need to share detailed business plans, financial projections, or proprietary technology. An NDA protects your ideas.
Freelance projects
Clients often share sensitive information during projects. An NDA reassures them that their data is safe with you, and can be required before contracts are signed.
Mutual vs one-way NDAs
Choosing the right type of NDA depends on who is sharing confidential information.
One-way NDA
One party discloses information, the other receives it. Use when only one side is sharing secrets.
Examples: employer to employee, client to contractor, company to consultant.
Mutual NDA (Bilateral)
Both parties share and receive confidential information. Both are bound to keep each other's information private.
Examples: business partnerships, joint ventures, collaboration discussions, merger talks.
If in doubt, use a mutual NDA. It costs nothing extra to protect both sides, and it signals good faith in the relationship.
Key clauses in an NDA
Understanding what each clause does helps you customize your NDA appropriately:
Definition of confidential information
Be specific about what is protected. "All information shared" is broad but may be harder to enforce. Listing categories (financial data, customer lists, trade secrets) provides clarity.
Exclusions
Standard NDAs exclude information that becomes public, was already known, or is independently developed. These exclusions are industry standard and make the NDA more enforceable.
Obligations
The core of the NDA: the receiving party must keep information confidential, limit access to those who need it, and not use it for unauthorized purposes.
Duration
How long the confidentiality obligation lasts. Two to three years is common. Perpetual NDAs exist but may be harder to enforce depending on jurisdiction.
Return of materials
Requires the receiving party to return or destroy confidential materials when the agreement ends or upon request.
Injunctive relief
States that violations may cause irreparable harm, allowing the disclosing party to seek immediate court action (injunction) rather than waiting for monetary damages.
