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Non-disclosure agreement: What is an NDA?
What is an NDA, and how does it keep confidential information safe?
NDA meaning.
What is an NDA in layman’s terms? A nondisclosure agreement (NDA) is a legal document between two or more parties who agree not to disclose any sensitive information revealed over the course of doing business together. NDAs provide important protection for business owners who share confidential information with other parties, such as future partners or investors, employees, and contractors.
What is an NDA used for?
Legal contracts like confidentiality agreements can be important for small businesses and startups, both in and out of the tech world. If you have a great idea or invent technology, new products, or proprietary formulas you want to sell, you might need to share it with others in order to seek funding, start production, and bring your product to market. Your business plan itself and valuable customer lists might also need protection.
NDAs are helpful for more than working with full-time new hires at an organization. Many companies and vendors use NDAs when:
- Sharing sensitive information with contractors or freelancers
- Disclosing private content to potential or onboarded investors or vendors
- Collaborating with anyone who you will be working closely with over a long period of time
You should always consult with an attorney to determine whether you need an NDA for your situation. Consider using an NDA any time you enter into a confidential business relationship, but especially before you do any of the following:
- Discuss the sale or licensing of your intellectual property, including any product or technology
- Grant employees or contractors access to trade secrets or other proprietary information
- Present an offer to potential investors, partners, or prospective buyers
5 common types of NDAs.
While all non-disclosure agreements are crafted for the similar purpose of protecting confidential corporate information, they are not all created equal. There are five types of NDAs most commonly used to enforce confidentiality, depending on the relationship between the company and those included in the agreement. They can also vary depending on how many different people are involved and how long the agreement is needed to remain in effect.
The five common types are:
- Mutual
- Non-mutual
- Multilateral
- Terminating
- Non-terminating
Mutual NDA.
The mutual NDA form is just that — a binding contract that goes two ways. Both parties agree to keep the information confidential.
Non-Mutual NDA.
Also known as a Unilateral or one-way NDA, these agreements cover situations where only one party (the discloser) is sharing confidential information with another or several parties (the receivers). The receivers are contractually required to keep the information secret.
Multilateral non-disclosure agreement.
Multilateral NDA agreements cover three or more parties who share proprietary information. One or more parties may disclose sensitive information, and all of the receiving parties promise to protect it. When many parties are involved, these types of NDAs can be more efficient than establishing multiple separate agreements.
Terminating non-disclosure agreement.
These are NDAs that expire. After an agreed time period, the disclosing party releases the receiving party from the agreement. The agreement can be set to end on a specific date or when the business relationship ends.
Non-terminating NDA agreement.
These confidential disclosure agreements never expire, and the receiving party is bound to keep the information secret for as long as the parties work together or until the information becomes publicly available.
What can an NDA include?
A nondisclosure agreement can include quite a bit of information. It’s always a good idea to get legal advice before executing one, to be sure of the exact NDA meaning. These are some of the most common items that are included in NDA templates:
- Definition of the sensitive or proprietary information. What type of information does the agreement cover? What are the reasons for the disclosure?
- Identification of the parties to the agreement. Who is the discloser? Who is the recipient?
- Specific clauses and distinctions. Must the recipient make their best effort to keep the information secret? Do they receive information only on a need-to-know basis? Is the information “no use,” meaning that the recipient has no right to use the information in any way other than directed in the agreement?
- Exclusions. What information doesn’t count as secret? What information is considered public knowledge?
- Obligations of the recipient. What must the recipient do with the information they receive? What can’t they do?
- Time periods. Does the agreement last for a specific time period or for the length of a project or business partnership?
- Other terms. Who pays any legal fees to law firms and attorneys? How will disputes be resolved? After a certain time period, can the recipient hire the discloser’s employees? Note that there are differences between an NDA and a non-compete agreement to take into consideration.
What are NDA limitations?
While NDAs can be protective for an organization, they are not always ironclad. At a high level, limitations can include:
- Time period. Keep in mind that NDAs typically apply to a set period of time. Once the specified duration has passed, you may not be legally obligated to follow the terms of the original agreement.
- Scope. Inclusions or exclusions are another area that can limit an NDA. These documents can only apply to information that is explicitly defined in the NDA. It’s important to be clear on what is covered and what isn’t before you issue or sign an NDA. Make sure that there are well-defined explanations for terms such as financial information, trade secrets, and intellectual property so there can be no misunderstanding of what is included in the NDA’s scope. Definitions that are considered to be too broad may not be enforceable.
- Jurisdiction. Even if the content is detailed in an NDA, the document may have limited power. Some states have particular laws in place that set limits on how enforceable an NDA is, especially if an individual is asked to keep unlawful information in confidence. Knowledge already in the public domain is also typically exempt from an NDA.
Complete non-disclosure agreements fast with Adobe Acrobat.
The sooner the NDAs are signed, the sooner you can move the business forward. With Acrobat, you can send an agreement securely as a PDF in just a few quick steps. Then, track its progress. Your future partners, investors, and employees can access your branded documents and add their e-signatures from any device, and you can get right to work.
Frequently asked questions about NDAs.
What is an MNDA agreement?
One of the most frequently used types of confidentiality agreements is the mutual nondisclosure agreement (MNDA). In a unilateral NDA, one party agrees not to disclose confidential information belonging to the other party. In a mutual NDA, by contrast, both parties agree not to reveal each other’s confidential information. While the unilateral NDA is a one-way street, an MNDA creates a confidential relationship where information is protected by both parties.
How long do NDAs last?
Do NDAs expire, and how long do they typically last? Some confidentiality agreements, called terminating NDAs, are set to expire after a certain time — a specified date, for example, or when a particular project or business relationship ends. The disclosing party then releases the receiving party from the agreement. Non-terminating NDAs, on the other hand, never expire. The receiving party is bound to keep the information confidential for as long as the parties work together or until the information becomes publicly available. The terminating of the NDA and any continuing obligations after the NDA is terminated may be specifically addressed within the NDA.
How can I send my NDA for e-signatures?
Once you have an NDA template that meets your needs, and you’ve run it past your own legal advisers, it’s quick and easy to send it as a secure PDF with Acrobat and request signature for execution. Then you can track its progress as future partners, investors, employees, or contractors fill the forms and add their binding e-signatures.
What happens if you break an NDA?
Breaking an NDA can have various consequences depending on the enforceability of the original document you signed. Most of the specific penalties will be outlined in the NDA itself. Typical outcomes can include the payment of fines and legal fees, the potential for lawsuits, and even the possibility of jail time.