A Non-Disclosure Agreement (NDA), also known as a confidentiality agreement, is a legal contract that protects sensitive information from being disclosed to third parties. NDAs are widely used in business — from pitching to investors, to working with freelancers, to joint ventures.

In this guide, we explain what an NDA is, why you might need one, and the key clauses to include when drafting your own.

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What Is an NDA?

An NDA is a legally binding contract between two or more parties that sets out how confidential information will be shared and protected.

There are two main types:

• Unilateral NDA — one party agrees to keep the other’s information confidential.
• Mutual NDA — both parties share confidential information and agree to protect it.

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When Do You Need an NDA?

Common situations where NDAs are used include:

• Sharing business ideas with potential investors.
• Working with contractors, freelancers or suppliers.
• Discussing possible partnerships or joint ventures.
• Employees with access to trade secrets, client lists or processes.

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How to Write an NDA: Key Clauses

When drafting an NDA, it’s important to cover certain essentials:

1. Parties to the Agreement

Clearly identify who is bound by the NDA. Include company names, registered addresses, and individual signatories.

2. Definition of Confidential Information

Define what counts as “confidential information”. For example: financial data, client lists, intellectual property, trade secrets, marketing plans, or prototypes.

3. Exclusions from Confidential Information

List what is not confidential — e.g. information already in the public domain, or details known to the receiving party before signing.

4. Obligations of the Receiving Party

Set out how the receiving party must protect the information — e.g. storing data securely, not sharing with third parties, and only using it for the agreed purpose.

5. Term (Duration) of the NDA

Specify how long confidentiality obligations last. Commonly between 2–5 years, but this can vary depending on the type of information.

6. Permitted Disclosure

Outline circumstances where disclosure is allowed — for example, to employees, contractors, or advisers who also agree to confidentiality.

7. Consequences of Breach

State what remedies are available if the NDA is breached, such as damages or injunctive relief (court order preventing further disclosure).

8. Governing Law and Jurisdiction

For UK businesses, specify that the NDA is governed by English law (or Scottish law, if applicable) and which courts have jurisdiction.

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Common Mistakes to Avoid

• Using vague or overly broad definitions of “confidential information”.
• Failing to include an expiry date (perpetual NDAs can be difficult to enforce).
• Not tailoring NDAs to the specific situation (e.g. unilateral vs mutual).
• Forgetting to get all relevant parties to sign before information is shared.

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Should You Use an NDA Template?

Templates can be a good starting point, but NDAs should be tailored to your specific needs. If the information being shared is highly valuable (e.g. intellectual property or trade secrets), it’s wise to seek professional legal advice.

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Conclusion

NDAs are an essential tool for protecting sensitive information in business dealings. By including clear definitions, obligations, and remedies, you can ensure that your confidential information stays safe.