A Non-Disclosure Agreement (NDA) is a legally binding contract that establishes a confidential relationship between a disclosing party who shares sensitive information and a receiving party who agrees to keep that information secret. The agreement creates enforceable legal obligations prohibiting the receiving party from disclosing, using, or exploiting the confidential information for any purpose other than the one specified in the agreement, with defined remedies for breach including injunctive relief and monetary damages.

NDAs operate within a legal framework anchored by the Defend Trade Secrets Act of 2016 (DTSA, 18 U.S.C. Sections 1831-1839) at the federal level and the Uniform Trade Secrets Act (UTSA) adopted by forty-eight states. While these statutes protect information meeting the legal definition of a trade secret, an NDA extends contractual protection to a broader category of confidential business information that may not qualify as a trade secret under statutory definitions. Critically, courts evaluating trade secret claims examine whether the owner took reasonable measures to maintain secrecy, and a signed NDA constitutes strong evidence of such measures.

NDAs come in two primary forms. A unilateral (one-way) NDA protects information flowing from one party to another, commonly used in employer-employee relationships, contractor engagements, and vendor arrangements. A mutual (bilateral) NDA protects information exchanged by both parties simultaneously, standard in business negotiations, partnership discussions, and merger and acquisition due diligence. The choice between unilateral and mutual depends on whether one or both parties will disclose sensitive information during the relationship.

An NDA is distinct from a non-compete agreement, which restricts competitive activity, and a non-solicitation agreement, which prevents recruiting employees or customers. While these restrictive covenants are often combined in employment contexts, each addresses a different legal risk and carries different enforceability standards across jurisdictions.

An NDA is essential whenever sensitive business information will be shared with parties who are not otherwise bound by a duty of confidentiality. A company is hiring a freelance developer, designer, or consultant who will access proprietary source code, system architecture, database schemas, or business processes during the engagement. The NDA should be executed before any project materials are shared, ideally as part of the independent contractor agreement.

A startup or established business is entering due diligence with potential investors, acquirers, or merger partners who will review financial statements, cap tables, customer metrics, revenue projections, and pending litigation details. An NDA with a defined survival period of three to five years protects both parties if the transaction does not proceed. A manufacturer is sharing proprietary formulations, production methods, or tooling specifications with a contract manufacturer or supply chain partner who could potentially replicate the product.

An employer is onboarding new employees who will access trade secrets, customer lists, pricing strategies, or unreleased product information. The NDA should be included in the onboarding packet alongside the offer letter and signed before the employee's start date. A company is engaging a marketing agency, PR firm, or data analytics provider that will receive access to customer databases, campaign performance metrics, or competitive intelligence.

Two businesses are exploring a potential joint venture, licensing arrangement, or distribution partnership that requires sharing market research, sales data, and strategic plans before formalizing the relationship. A software company is providing beta access or API documentation to potential integration partners who will see proprietary architecture and feature roadmaps.

The definition of confidential information is the foundation of any enforceable NDA and must be specific enough to put the receiving party on clear notice of what is protected. Courts have invalidated overly vague definitions, so list specific categories including trade secrets, source code, algorithms, customer and vendor lists, pricing models, financial projections, marketing strategies, employee data, technical specifications, prototypes, and any information designated as confidential at the time of disclosure. Include both written and oral disclosures, as well as information observable during facility visits.

Standard exclusions must carve out information that is publicly available through no fault of the receiving party, was known to the receiving party prior to disclosure, is independently developed without reference to confidential materials, or is received from a third party without restriction. Under the DTSA whistleblower immunity provision (18 U.S.C. Section 1833(b)), the agreement must notify the receiving party that disclosures to government officials for reporting suspected legal violations are protected, or the disclosing party forfeits the right to exemplary damages and attorney fees in DTSA actions.

The duration clause should specify both the agreement term and the survival period for confidentiality obligations after termination. Two to three years is standard for general business information, while trade secret protections may extend indefinitely consistent with UTSA provisions. The permitted use clause must restrict the receiving party to using confidential information solely for the stated purpose and prohibit reverse engineering, competitive analysis, or commercial exploitation.

The remedies section should establish that the disclosing party is entitled to injunctive relief under Federal Rule of Civil Procedure 65 without demonstrating irreparable harm, in addition to actual and consequential damages. Include a return or destruction of materials clause requiring the receiving party to surrender or certify destruction of all confidential materials upon termination. Specify governing law, dispute resolution procedures, and the prevailing party's entitlement to attorney fees. Both parties must sign and date the agreement, with the disclosing party retaining the original executed copy.