NDA — FAQ
25 answers to the most common NDA questions.
What is an NDA?
A Non-Disclosure Agreement (NDA) is a legally binding contract in which parties agree to keep certain information confidential. NDAs are also called confidentiality agreements, secrecy agreements, or proprietary information agreements.
What is the difference between a mutual and one-way NDA?
A mutual NDA protects information flowing in both directions — used when both parties share confidential information. A one-way (unilateral) NDA protects information flowing in one direction — used when only one party discloses confidential information.
When should I use an NDA?
Use an NDA before: sharing business plans with investors, discussing partnerships or joint ventures, engaging vendors or contractors, interviewing job candidates for sensitive roles, or sharing proprietary product or technology details.
Is an NDA legally binding?
Yes, when properly executed. An NDA is a contract requiring offer, acceptance, and consideration. The consideration is typically the exchange of confidential information or the business relationship the NDA enables.
What should an NDA include?
Key NDA elements: (1) Definition of confidential information; (2) Exclusions (public info, independently developed info); (3) Obligations of receiving party; (4) Permitted disclosures; (5) Term/duration; (6) Return or destruction of information; (7) Governing law.
How long should an NDA last?
Most NDAs last 1-3 years. Trade secret NDAs may be indefinite. Employment NDAs often survive the employment relationship. The appropriate term depends on how long the information retains its competitive value.
Can an NDA be enforced?
Yes, if properly drafted. Courts regularly enforce NDAs and can award damages, injunctive relief, and attorneys fees. However, overbroad NDAs may be partially or fully unenforceable depending on state law.
What is a trade secret?
A trade secret is information that derives economic value from being kept secret and is subject to reasonable secrecy measures. Examples: formulas, algorithms, customer lists, pricing strategies, manufacturing processes. NDAs are a key tool for protecting trade secrets.
Does an NDA protect trade secrets?
An NDA is a contractual protection for trade secrets. Federal law (Defend Trade Secrets Act) and state laws (most states have adopted the Uniform Trade Secrets Act) provide additional statutory protection.
What happens if someone violates an NDA?
The non-breaching party can seek: (1) Injunctive relief to stop the breach immediately; (2) Actual damages (lost profits, business harm); (3) Unjust enrichment (profits the breaching party made); (4) Attorneys fees if the NDA includes a fee-shifting provision.
Can an NDA prevent someone from working for a competitor?
A standard NDA does not prevent competition. That requires a separate non-compete clause. Non-competes are subject to separate legal requirements and are void or unenforceable in several states including CA, MN, ND, and OK.
What is the Defend Trade Secrets Act (DTSA)?
The DTSA (2016) created a federal civil cause of action for trade secret misappropriation. It allows trade secret owners to sue in federal court, seek injunctions, and claim damages — complementing state NDA remedies.
Can an NDA be signed electronically?
Yes. Under ESIGN and UETA, electronic signatures are legally equivalent to handwritten signatures for most contracts, including NDAs. DocuSign, HelloSign, and similar tools create enforceable electronic NDAs.
Do I need an attorney to draft an NDA?
For simple NDAs in standard business contexts, a template may be sufficient. For complex transactions, IP-heavy disclosures, or high-stakes M&A situations, having an attorney review or draft the NDA is strongly recommended.
What is a standard NDA for employees?
Employee NDAs typically include confidentiality obligations for all company information learned during employment, survive termination of employment, and are signed as a condition of employment or continued employment.
Can I use a template NDA?
Template NDAs are common starting points. However, they should be customized for your specific situation — the parties involved, type of information being shared, jurisdiction, and any industry-specific requirements.
What is an NDA carve-out?
A carve-out is an exception to confidentiality — information that the receiving party may disclose despite the NDA. Common carve-outs: required government disclosures, court orders, and information the receiving party developed independently.
What is the difference between confidential and proprietary?
Confidential means kept secret from unauthorized parties. Proprietary means owned by a specific party. Information can be both — a proprietary algorithm is also confidential. Most NDAs use both terms to capture the broadest protection.
Can a company require me to sign an NDA?
Yes. Employers can require employees to sign NDAs as a condition of employment. Companies can require vendors, contractors, and partners to sign NDAs before receiving information. Refusing to sign may mean not getting the job or contract.
How do I store executed NDAs?
Store signed NDAs securely — ideally in a contract management system or cloud storage with access controls. Keep them for at least the term of the agreement plus applicable statute of limitations (typically 3-6 years after breach could occur).
Can an NDA cover verbal disclosures?
Yes, if the NDA specifies it. Some NDAs cover only written disclosures; others cover written, oral, visual, and electronic disclosures. Oral disclosures should be confirmed in writing within a set period to be covered.
What is a perpetual NDA?
A perpetual NDA has no expiration — confidentiality obligations last indefinitely. Courts scrutinize perpetual NDAs, especially in employment contexts, but they are enforceable for genuine trade secrets that retain ongoing value.
What is a due diligence NDA?
A due diligence NDA is signed before an M&A process. It protects financial statements, customer data, IP, and strategic plans shared during the buyer investigation. These are typically mutual and heavily negotiated.
Should an NDA include a dispute resolution clause?
Yes, consider adding mediation or arbitration clauses if you want to avoid litigation. Specify the forum (AAA, JAMS) and governing state. Litigation can be expensive — alternative dispute resolution (ADR) saves time and money.
How accurate is this NDA generator?
Our NDA generator produces a solid standard NDA covering core provisions. For high-value transactions, cross-border agreements, or situations with complex IP, have an attorney review the document before signing.