What an NDA is, in plain English
An NDA (non-disclosure agreement) is a contract where one or both parties promise to keep certain information confidential. It defines what counts as 'confidential', how the information can be used, how long the obligation lasts, and what happens if someone breaks the promise.
A good NDA is short, specific, and signed before sensitive information is shared — not after.
Mutual vs one-way NDAs
A one-way NDA (sometimes called unilateral) is used when only one side will share confidential information — for example, a founder showing a deck to a vendor.
A mutual NDA is used when both parties will exchange sensitive information — for example, two companies exploring a partnership, or a company and a contractor reviewing each other's systems.
Five business scenarios where an NDA is worth signing
These are the most common situations where an NDA actually matters in day-to-day business:
- Pitching a strategic investor or angel who isn't a major VC
- Hiring a contractor who will see private code, customer data, or financials
- Exploring a partnership, joint venture, or acquisition
- Sharing a prototype, demo, or product roadmap for evaluation
- Letting a third party audit your books, security, or operations
When an NDA is overkill
If the information is already public, you don't need an NDA. If you're hiring a W-2 employee, use an employment agreement with a confidentiality clause instead. If you're signing a master services agreement, the confidentiality terms are usually built in.
Most large VCs also won't sign NDAs at the seed stage — pushing for one can stall a conversation that should have moved forward.
What a strong NDA includes
Whatever template you use, make sure it covers these basics:
- A clear definition of what counts as confidential information
- Standard exclusions (already public, independently developed, required by law)
- Permitted use — usually limited to evaluating the relationship
- A term (often 2–5 years) with survival for trade secrets
- Governing law and signature blocks for both sides
Frequently asked
- Are NDAs legally binding?
- Yes. Once signed by both parties, an NDA is a binding contract under most U.S. state laws, provided the terms are reasonable and the information truly is confidential.
- How long should an NDA last?
- A 2–5 year term is typical for general business conversations. Trade secrets are often protected for as long as the information stays confidential.
- Can I send an NDA after I've already shared the information?
- Yes, but it's much weaker. NDAs work best when signed before any confidential information changes hands.
- Is a verbal NDA enforceable?
- Sometimes, but proving it is difficult. Always get NDAs in writing.
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