How to Write a Non-Disclosure Agreement

A Non-Disclosure Agreement (NDA), also known as a confidentiality agreement, is a legally binding contract that establishes a confidential relationship between two or more parties. The party disclosing information (the disclosing party) shares sensitive business information with the receiving party under the obligation that such information will not be shared with third parties.

The key elements of an effective NDA include: (1) Definition of confidential information — be specific about what is covered, including trade secrets, business plans, customer lists, financial data, and proprietary technology. (2) Obligations of the receiving party — clearly state that the recipient must protect the information using reasonable measures. (3) Exclusions from confidentiality — standard exclusions include information that is publicly available, already known to the recipient, independently developed, or required to be disclosed by law.

Duration is a critical consideration. While some NDAs are perpetual for trade secrets, most specify a term of 2-5 years for general confidential information. The agreement should also address what happens to confidential materials when the relationship ends — typically requiring return or destruction of all confidential documents.

Remedies for breach should be clearly outlined. Because monetary damages may be difficult to quantify for confidentiality breaches, NDAs typically include provisions for injunctive relief, allowing the disclosing party to seek a court order to stop further disclosure. Some agreements also include liquidated damages clauses.

When drafting an NDA, consider whether it should be mutual (both parties share confidential information) or unilateral (only one party discloses). Mutual NDAs are common in business negotiations, joint ventures, and partnerships, while unilateral NDAs are typical in employment and contractor relationships.