What to know before signing an NDA

A non-disclosure agreement, or NDA, is a promise to keep certain information private. NDAs arrive early in many relationships: before a supplier pitch, an investor meeting, a partnership conversation or the first day of a new job. Because they are so common, they are often signed without being read. That is usually where the trouble starts.

A common situation: a small design studio is invited to pitch for work with a much larger company. Before the meeting, the studio is sent a short NDA and asked to sign and return it the same day. It looks routine. Nobody at the studio has time to read it closely, so they sign. Months later, when the studio wants to show similar work to another client, someone finally reads the agreement and realises it may restrict far more than they expected.

The questions below take a short while to work through and cover most of what matters in a typical NDA.

Is it one-way or mutual?

A one-way NDA protects only one side's information. A mutual NDA protects both. If you will be sharing anything of your own, such as pricing, methods, designs or customer names, a one-way agreement in the other side's favour leaves your information unprotected. Asking for a mutual version is a common and reasonable request.

What counts as confidential information?

This definition sets the size of the whole promise. Some agreements cover only information that is clearly marked as confidential. Others cover anything shared, in any form, whether or not it was labelled. A very broad definition can make it hard to know what you are allowed to talk about later, or what you can reuse in your own work.

Look also for the usual exclusions: information that is already public, that you knew before, that you developed independently, or that you received from someone else without restriction. If these are missing, ask why.

The definition of confidential information sets the size of the promise. Read it before anything else.

What are you allowed to do with it?

Most NDAs limit how you can use the information, not just who you can tell. A typical clause allows use only for a stated purpose, such as evaluating a possible deal. Check that the purpose is wide enough for what you actually need to do, and narrow enough that it does not quietly stop you working in your own field.

Who can see it?

Can you share the information with your employees, advisers, accountants or subcontractors? Many agreements allow this if those people need to know and are bound by similar confidentiality obligations. If the agreement does not mention them at all, you may be breaching it simply by asking your own adviser for help.

How long does it last?

Some NDAs end after a fixed period. Others last indefinitely, at least for certain kinds of information such as trade secrets, which are valuable business information kept secret on purpose. Neither approach is automatically wrong, but you should know which one you are agreeing to and whether it fits what is being shared.

Clauses that are easy to miss

• What you must do with the information when the relationship ends, such as return or destroy it, and whether you must confirm that in writing.
• Whether the agreement quietly adds other obligations, such as not hiring the other side's staff or not working with their competitors.
• Which country's or state's law governs the agreement, and where any dispute would be heard.
• What happens if you are legally required to disclose the information, for example by a court or regulator.
• Any statement that a breach entitles the other side to particular remedies. How such clauses are treated varies by place.

Asking for changes is normal

Many people assume an NDA is a standard form that cannot be changed. In practice, reasonable requests are common: making the agreement mutual, narrowing the definition, adding the usual exclusions or shortening the duration. A polite, specific request is rarely seen as difficult.

When to ask for help

How these clauses are read and enforced varies from place to place, so a term that is ordinary in one jurisdiction may be unusual in another. If the agreement is long, covers valuable information, or contains obligations you did not expect, it is worth having a lawyer read it before you sign. If you need to send an NDA rather than sign one, ArieFirm's ready-to-use NDA lets you set out these points clearly from the start.