Non-Disclosure Agreements (NDAs): Everything You Need to Know

Key takeaways:

• Implement standardized NDA templates and contract lifecycle management software to reduce approval time, as NDAs with non-standard terms take three times longer to process and can create bottlenecks for legal teams handling hundreds or thousands of agreements monthly.

• Ensure all NDAs are signed before disclosing any sensitive information, as confidentiality agreements cannot retroactively protect information that was already known to the receiving party.

• Draft NDAs with specific, clearly defined scope and confidentiality terms rather than vague language like “proprietary information,” as ambiguous wording weakens enforceability and may not hold up in court.

• Recognize that NDAs have inherent limitations including enforcement challenges, time-limited protection, and inability to cover public information or information disclosed through legal proceedings.

How many NDAs does your organization handle in a typical month? Five? Twenty? If you’re at a fast-growing company, try hundreds—and for large enterprises, that number can swell to 20,000-40,000 active contracts. These confidentiality agreements touch every new partnership discussion, every contractor onboarding, every investor conversation. Yet most legal teams still manage them like it’s 1995—manual processes, scattered templates, endless email chains chasing signatures.

Here’s what’s interesting about NDAs: they’re simultaneously the most common and most underestimated contracts in business. Everyone knows they need them, but few organizations have figured out how to handle them efficiently. In fact, while 90% of NDAs are initiated on a company’s own paper, they still require legal involvement 30% of the time, according to The 2025 Contracting Benchmark Report. The result? Legal teams spend countless hours on administrative work instead of strategic thinking, and business teams get frustrated waiting for approvals on what should be straightforward agreements.

Let’s talk about how to handle NDAs like the strategic tools they actually are—protecting your competitive advantages while keeping business moving at the speed your company needs. Whether you’re drowning in NDA requests or trying to understand why these agreements matter so much, we’ll walk through what it takes to get this essential part of your contract workflow running smoothly.

What is an NDA?

A non-disclosure agreement (NDA) is a legally enforceable contract that creates a confidential relationship between parties sharing sensitive information. The agreement establishes a legal duty for one or both parties to keep specific information confidential.

Unlike service agreements or sales contracts that govern transactions, NDAs serve a more focused purpose—they specifically protect information privacy and trade secrets.

These agreements show up in several common business situations. Employers typically require new hires to sign them during onboarding, and researchers estimate that between one-third and over half of all U.S. workers are constrained by an NDA or a similar mechanism. Clients often request them before sharing proprietary information with contractors or vendors.

You might also see NDAs referred to by several other names, including confidentiality agreements, confidentiality disclosure agreements, and non-disclosure contracts.

The purpose of a non-disclosure agreement

NDAs serve two primary purposes: maintaining confidentiality and providing legal protection for sensitive business information.

The scope of protection is broader than you might think. NDAs can protect a wide range of confidential information—product specifications, client lists, business models, test results, and embargoed press releases. Essentially, any proprietary information that gives your business a competitive advantage can be covered.

More importantly, NDAs create enforceable legal protection. The agreement establishes a framework that prevents information from being shared with competitors or unauthorized third parties. This protection extends to both intentional disclosure and accidental breaches.

Violating an NDA triggers serious legal consequences. These can include lawsuits, financial penalties, and in severe cases, criminal charges depending on the nature of the information disclosed.

NDAs perform three essential functions in business relationships:

• Information classification: NDAs clearly define what information must remain confidential and what can be shared freely. This classification creates clear boundaries that allow parties to collaborate effectively while protecting sensitive data.

• Legal obligation creation: Signing an NDA establishes a binding legal duty to maintain confidentiality. Any unauthorized disclosure of protected information constitutes a breach of contract with legal consequences.

• Patent protection: NDAs protect inventors during product development by preventing premature public disclosure. This protection is crucial because public disclosure of pending inventions can void patent rights.

When do you need an NDA?

You need an NDA whenever sensitive business information will be shared with parties outside your organization. Here are five common situations that require confidentiality agreements:

• Product development and licensing: NDAs protect technical specifications, financial data, and proprietary information during product sales or licensing discussions. This prevents valuable intellectual property from reaching competitors.

• Employee relationships: Beyond product discussions, NDAs ensure employees cannot share confidential information during their employment or after they leave your organization. This protection covers trade secrets, client lists, and internal processes.

• Partnership negotiations: When exploring potential business relationships, NDAs protect sensitive information shared during investor meetings or partnership discussions. This allows open communication while preventing misuse of strategic information.

• Client onboarding: NDAs work both ways when onboarding new clients. They protect your organization from liability while ensuring client confidential information remains secure.

• M&A transactions: Mergers and acquisitions involve extensive confidential information sharing requiring comprehensive NDAs

Confidentiality disclosure agreements are also common when presenting information to potential investors, contracting with vendors, and while exploring joint ventures.

Types of NDAs

Generally speaking, non-disclosure agreements fall into two main categories: unilateral and mutual (there’s also the multilateral type, but those aren’t as common). In a unilateral NDA, one party agrees not to reveal confidential information. In a mutual NDA, both sides agree that they will not share confidential information.

In all other aspects, these two types of confidentiality agreements are identical, especially when it comes to enforcement and the consequences of a breach.

To see how this works in practice, consider an employment contract as an excellent example of a unilateral NDA. When an employee is hired, they sign a unilateral NDA agreeing not to share information learned on the job. By contrast, if one company is merging or acquiring another company, a mutual NDA ensures none of the parties participating in the process divulge confidential information.

When drafting your confidentiality agreement, here are a few questions that will determine whether you need a unilateral or mutual NDA:

Business type

Does the activity involve a mutual exchange of information or multiple actors (e.g., mergers and acquisitions, joint ventures, teaming agreements)?

Reciprocity

Are both sides equally protected and obligated so that neither is unfairly “favored” by the agreement?

Number of parties

Are there more than two parties participating, or is each participating party providing information?

Parts of a non-disclosure agreement

All NDAs should include these specific elements:

Identification of parties

Also known as “parties to the agreement,” the purpose of this section is to identify the people and/or entities involved in the non-disclosure contract. It explains who the disclosing party and recipient are, using their names and addresses. Relevant parties such as attorneys, accountants, or business partners may also be included.

Definitions

This section of the NDA lays out the different types of information covered by the agreement and establishes rules regarding how it is handled. It answers the question of what information is confidential.

Obligations

What happens if protected information is shared? An NDA not only sets out the specific behavior expected from each signatory, but it also lays out the consequences of breaching the agreement.

Scope

A clearly defined scope ensures an NDA’s enforceability. Using general terms like “proprietary information” isn’t specific enough and may not hold up in a legal setting; in one high-profile case, an agreement was held to be in breach of competition law and deemed unenforceable because its wording “went further than could reasonably be required.” Scope should lay out what specific information the NDA covers.

Time frame

Most NDAs don’t last forever, and many confidentiality agreements explicitly state the number of years that sensitive information must be kept secret. Even those with an indefinite time frame will often indicate when information is no longer protected by the agreement.

Return of information

After the conclusion of business between the parties, an NDA may require that the recipient confirm that sensitive information has been returned or destroyed.

Exclusions

These are the types of information that do not need to be kept confidential. This might include public knowledge, previously disclosed details, or information someone knew before entering a business or financial relationship with a company or firm.

Remedies

If there’s a breach of the confidentiality agreement, what happens? There are many possible courses of action, or remedies. These may include a restraining order, payment for damages, and other actions for breach of fiduciary duty and copyright, patent, or trademark infringement.

Creating an NDA

Creating a legally binding NDA requires specific, precise language throughout the document. Vague or overly broad terms may not hold up in court.

Key drafting requirements include clearly defining confidential information, identifying all parties, and establishing specific scope limitations. Ambiguous language that allows multiple interpretations weakens enforceability.

Timing matters for NDA effectiveness. You must have the signed agreement in place before disclosing any sensitive information you want protected. NDAs cannot retroactively protect information that was already known to the receiving party.

Here’s where it gets challenging for most organizations: there is currently no standard system for NDAs, leaving organizations to create them on their own. Analysis from The Legal AI Handbook reveals that NDAs with non-standard confidentiality terms take three times longer to approve. This places heavy demand on legal teams who could be spending time on other priorities, though some have found ways to streamline contract review and cut NDA turnaround from days to hours. A standard NDA helps with this, and in a perfect world the contract is automated, accepted with the click of a button, and stored and updated electronically in case you need it later.

You do not need a lawyer to create and sign a non-disclosure agreement. However, if the information you are trying to protect is important enough to warrant an NDA, you may want to have the document reviewed by someone with legal expertise. Some contract lifecycle management software helps with this as well as providing a system for managing NDAs on a corporate level.

Contract lifecycle management software brings thoroughness and clarity to the NDA creation process. It ensures that you:

• Stay focused and fair. A non-disclosure contract should only include agreements to keep information private. Provisions like non-solicitation and non-competes will likely result in pushback from the signing party.
• Are brief. Generally, an NDA should fit on one page. Use clear and concise language that focuses only on disclosure.
• Use templates wisely. Organization-wide NDA templates are helpful, but every use case is unique. Read through the confidentiality agreement to ensure that the definitions, access, and safeguards it describes make sense for the situation.
• Know your terms. Provisions on severability, change-in-control, and exclusion of damage are not always necessary. Other times, they require extra clarity.

If writing an NDA on your own seems overwhelming or complicated, consider using contract lifecycle management software backed by legal experts. These programs come with digital contract management systems that store, track, organize, and collect signatures on contracts. With a workflow designer, data repository, and collaboration tools, you’ll have everything you need to automate contract tasks like keeping up with renewal dates and obligations. These systems help organizations manage multiple contracts in less time, freeing up teams for more strategic work.

Using an NDA template

NDA templates are pre-written agreements that can be used as a starting point for negotiating an NDA.

There are a few benefits of using a standard NDA template:

• Time savings: NDA templates can save you time by providing a starting point for negotiating a standard NDA. This can be helpful if you are not familiar with the legal requirements for an NDA, or if the nature of your business requires managing a high volume of NDAs.
• Cost savings: NDA templates can save you money by providing a cost-effective way to protect your confidential information. This is because you do not need to have general counsel draft each NDA if you use a template.
• Peace of mind: NDA templates can give you peace of mind by providing a legal framework for protecting your confidential information. This can help you to focus on your business knowing that your confidential information is protected.

Signing an NDA

You’ll commonly be asked to sign NDAs in situations where you’ll access sensitive business information. This is standard business practice designed to protect confidential data.

Common NDA signing situations include:

• Employment: New job offers typically include NDAs to protect company trade secrets and client information

• Client relationships: New client contracts often require mutual NDAs to protect both parties’ confidential information

• Investment discussions: Investors and entrepreneurs use NDAs to share financial data and business plans safely

• Business partnerships: Joint venture negotiations require NDAs to protect strategic information during discussions

• M&A transactions: Mergers and acquisitions involve extensive confidential information sharing requiring comprehensive NDAs

When presented with an NDA, expect to see standard components like party identification, confidentiality definitions, and scope limitations. Take time to review the agreement carefully before signing to ensure you understand your obligations.

Before signing an NDA, take time to read it carefully and ensure you understand the contract. If you find broad or vague language that unreasonably restricts you, it may make sense to refuse to sign until that is resolved. Specific examples of this may include statements that you can’t divulge information that is public, knowledge that you already possess, or information received from a third party.

How to enforce an NDA

Enforcing a non-disclosure agreement (NDA) can be challenging, but there are several steps that companies can take to protect their confidential information and enforce the terms of the agreement. Here are a few general steps:

• Identify the breach: The first step in enforcing an NDA is to identify the breach. This may involve monitoring employees, reviewing documents or communications, or conducting an investigation.
• Send a cease and desist letter: Once a breach has been identified, the company should send a cease and desist letter to the party who has breached the NDA. The letter should outline the breach, demand that the party cease all further disclosures, and provide a deadline for compliance.
• Seek injunctive relief: If the breach continues after the cease and desist letter has been sent, the company may need to seek injunctive relief from a court. This may involve filing a lawsuit and requesting a temporary restraining order or preliminary injunction to prevent further disclosures.
• Pursue damages: If the breach has resulted in damages to the company, such as lost profits or damage to reputation, the company may also seek monetary damages through a lawsuit.
• Consider alternative dispute resolution: In some cases, it may be more efficient or cost-effective to pursue alternative dispute resolution, such as arbitration or mediation, rather than litigation.

It’s important to note that the specific steps for enforcing an NDA may vary depending on the terms of the agreement and the jurisdiction in which it is being enforced. If you aren’t a lawyer yourself, consult with legal counsel to ensure you’re following the appropriate procedures and maximizing your chances of success.

What are the consequences of breaking an NDA?

The consequences for breaching a non-disclosure agreement (NDA) can vary depending on the terms of the agreement, the nature of the information that was disclosed, and the jurisdiction in which the agreement is being enforced. Here are some examples:

• Legal action: The party that was harmed by the breach of the NDA can take legal action to enforce the agreement and seek damages for any losses that were incurred. This may involve filing a lawsuit, seeking injunctive relief, or pursuing alternative dispute resolution.
• Financial penalties: NDAs often include provisions for financial penalties in the event of a breach. These penalties may be outlined in the agreement itself or may be determined by a court as part of a legal action.
• Reputation damage: Breaching an NDA can damage a person’s or company’s reputation, particularly if the breach involves sensitive or confidential information. This can lead to loss of trust and future business opportunities.
• Termination of employment or contract: Breaching an NDA can result in termination of employment or contract, particularly if the agreement was a condition of the employment or contract.
• Criminal charges: In some cases, breaching an NDA can result in criminal charges, particularly if the information that was disclosed was related to national security, government secrets, or other sensitive information.

Overall, the consequences for breaching an NDA can be significant, both in terms of legal and financial penalties and damage to reputation. Companies and individuals should take NDAs seriously and ensure that they are complying with the terms of the agreement to avoid these consequences.

Limitations of NDAs

NDAs have important limitations that can affect their effectiveness in protecting confidential information.

Enforcement challenges represent the most significant limitation. Proving NDA violations can be difficult, especially after information has already been disclosed. Courts may also refuse to enforce NDAs with overly broad scope or vague language. Even when violations are proven, obtaining injunctions or demonstrating financial damages often proves challenging.

Beyond enforcement issues, several other factors can limit NDA effectiveness:

• Public interest: In some cases, there may be a public interest in disclosing certain information, such as in cases of illegal activity, public health and safety, or government transparency. NDAs cannot be used to prevent the disclosure of information that is in the public interest.
• Limited protection: An NDA only provides protection for information that is specifically identified and defined in the agreement. If information is not covered by the NDA, or if it is disclosed in a way that is not prohibited by the agreement, it may not be protected.
• Time-limited protection: NDAs are typically time-limited, meaning that they only provide protection for a specific period of time. After the NDA expires, the information may no longer be considered confidential and may be disclosed freely.
• Limited jurisdiction: NDAs are typically governed by the laws of a specific jurisdiction, which may limit their effectiveness in other jurisdictions. In cases where the disclosing party is located in a different jurisdiction than the receiving party, it can be difficult to enforce the NDA.
• Reputation risks: In some cases, the use of NDAs can lead to negative publicity or damage to a company’s reputation. This can occur if the NDA is seen as an attempt to cover up wrongdoing or to silence victims of harassment or discrimination.

Of course, not all information can be protected. Public records, including SEC filings or company addresses, are not covered by these confidentiality agreements. The courts can also interpret the scope of an NDA in ways that one or more participants may not have initially expected. If the information covered in an NDA is revealed in another way—like through a court proceeding or subpoena—then the NDA no longer applies.

Additionally, managing multiple NDAs as an organization quickly becomes untenable without standardized language. When the number of NDAs starts reaching into the hundreds, reviewing, negotiating, and concluding unique contracts manually is extremely demanding and time-consuming. A standard, adaptable confidentiality agreement addresses this issue, but only if the organization takes the time or consults with experts to create a standard NDA that meets all its needs.

Potential risks of having an NDA

Non-disclosure agreements (NDAs) have some potential risks, including:

• Limiting transparency: NDAs can limit transparency and accountability, particularly in cases where the information being protected is related to public health and safety or government activity. In some cases, the use of NDAs can be seen as an attempt to cover up wrongdoing or to silence whistleblowers.
• Hindering innovation: NDAs can also limit innovation by preventing the free flow of information and ideas. In cases where NDAs are used to protect intellectual property, they can limit collaboration and stifle creativity.
• Creating legal risks: NDAs can create legal risks for both parties, particularly if the terms of the agreement are too broad or if the agreement is not properly enforced. If the NDA is breached or is found to be unenforceable, the parties may face legal liability and reputational damage.
• Damaging relationships: The use of NDAs can damage relationships between parties, particularly if one party feels that they have been unfairly restricted or silenced. In some cases, the use of NDAs can create a sense of mistrust and suspicion between parties.
• Limiting market access: NDAs can limit market access for companies, particularly if they prevent employees or partners from sharing information that is necessary for business development or expansion. This can limit growth opportunities and create barriers to entry for new market participants.

Overall, NDAs can be a useful tool for protecting confidential information, but it’s important to carefully consider the potential risks and limitations. Make sure your NDAs are properly tailored to your specific needs, and that they are being used appropriately and ethically.

Why NDAs are essential to business

Confidential information can include trade secrets, business plans, customer lists, financial information, and other proprietary information that gives a business a competitive advantage.

Here are some reasons why NDAs are essential to business:

• Protects confidential information: NDAs are used to protect confidential information from being disclosed to unauthorized parties. This can help a business maintain a competitive edge by keeping its valuable information secret.
• Prevents intellectual property theft: NDAs can help prevent intellectual property theft by making it illegal for someone to use or disclose a company’s confidential information without permission.
• Builds trust: Signing an NDA demonstrates a commitment to confidentiality and builds trust between the parties involved. This is especially important in business partnerships, joint ventures, and other situations where confidential information may be shared.
• Helps to attract investors: Investors are more likely to invest in a company that has taken steps to protect its confidential information through the use of NDAs. This can help a business attract the capital it needs to grow and expand.
• Protects customer and client information: NDAs can be used to protect customer and client information, ensuring that their personal data is not disclosed to unauthorized parties. This can help a business build trust with its customers and clients.

By protecting their confidential information, businesses can maintain a competitive edge, build trust with partners and customers, and attract investors to help them grow and expand.

Frequently asked questions about NDAs

Are NDAs still legal?

Yes, NDAs are absolutely still legal and widely used. However, you’re right to ask because the rules have been changing. For example, some states have passed laws like California’s ‘Silenced No More Act,’ and on a federal level, the U.S. Congress passed the Speak Out Act in 2022 to limit the use of NDAs in cases of sexual harassment and assault. So, while they’re still a standard business tool for protecting confidential information, their power isn’t unlimited, especially when it comes to issues of public interest or employee rights.

How long does an NDA last?

It really depends on what the agreement says. There’s no single standard duration. Some NDAs last for a specific period, like three, five, or 10 years. Others might last until the information is no longer confidential. For really sensitive stuff, like trade secrets, the obligation to keep it quiet could be indefinite. The key is to check the ‘Time frame’ or ‘Term’ section of the specific NDA you’re looking at—it should spell this out clearly.

Can you refuse to sign an NDA?

You can, but it depends on the situation. If you’re a potential employee or contractor, refusing to sign might mean you don’t get the job or the project. If the terms seem way too broad or unfair, though, you can—and should—try to negotiate. For example, if it tries to prevent you from using skills you already had or covers information that’s already public. It’s a business decision, really. You have to weigh the opportunity against the obligations you’d be taking on.

Next steps

NDAs might seem like just another piece of paperwork to manage, but they’re actually the foundation of business trust. When handled right, they protect your innovations, enable strategic partnerships, and give you the confidence to share what needs sharing without losing your competitive edge.

The real question isn’t whether you need NDAs—it’s whether you’re managing them efficiently. If your legal team is still manually tracking hundreds of agreements, chasing signatures through email, or using outdated templates that require heavy customization each time, you’re leaving value on the table. In fact, research from The 2025 Legal Operations Field Guide shows that organizations can lose five to nine percent of annual revenue from inefficient contract management.

Modern contract lifecycle management transforms NDAs from administrative burden to strategic asset. With the right tools, you can automate the entire NDA workflow—from generation through signature to renewal—while maintaining the control and customization your business requires.

Ready to see what better NDA management looks like? Request a demo today to learn how Ironclad helps you create, sign, and manage confidentiality agreements in a fraction of the time.

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Ironclad is not a law firm, and this post does not constitute or contain legal advice. To evaluate the accuracy, sufficiency, or reliability of the ideas and guidance reflected here, or the applicability of these materials to your business, you should consult with a licensed attorney. Use of and access to any of the resources contained within Ironclad’s site do not create an attorney-client relationship between the user and Ironclad.