Non-Disclosure Agreement (NDA) Drafting

What is an NDA?

A non-disclosure agreement (NDA), also called a confidentiality agreement, is a contract in which one or both parties agree not to disclose or misuse confidential information shared with them. It is the first document to sign before discussing a business idea, product, pricing, technology, customer data or investment terms.

One-way or mutual?

• One-way (unilateral) NDA: only one party shares confidential information – for example, a startup sharing its product with a vendor, or a company with a new employee or consultant.
• Mutual NDA: both parties share information – for example, two companies exploring a partnership or merger.

What a good NDA covers

• Definition of confidential information and what is excluded
• Permitted use and who within each organisation may see it
• Duration of confidentiality obligations
• Return or destruction of information at the end of discussions
• Non-solicitation of employees or customers (where appropriate)
• Remedies, including injunctions, and governing law and jurisdiction

When an NDA is not enough

An NDA protects information during discussions, but long-term protection of your brand, inventions and creative work comes from trademarks, patents and copyright. For ongoing work, use a service agreement or employment agreement with confidentiality and IP clauses.

Making your NDA enforceable

• Define confidential information precisely – too broad a definition is hard to enforce; too narrow leaves gaps.
• Set a reasonable duration – commonly two to five years after the discussions end, and longer for genuine trade secrets.
• Mark sensitive documents as confidential, and record what was shared.
• Include the right remedies – an injunction to stop disclosure is often more valuable than damages.
• Pay the correct stamp duty for your state, so the NDA can be relied on in court without delay.
• Choose the courts or arbitration that will hear any dispute.

Common mistakes

• Signing the other side's one-sided NDA when you are the one sharing information.
• Leaving out what happens to information shared before the NDA was signed.
• No clause on returning or deleting information when talks end.
• Assuming an NDA protects an idea indefinitely – it protects only the information it covers, for its term.

NDAs with employees, vendors and investors

Employees and vendors should sign confidentiality terms as part of their agreements. Investors, especially venture capital funds, often decline to sign NDAs at the first meeting because they see many similar businesses – share a high-level pitch first, and keep detailed technical or financial information for later, under an NDA if needed.