Non-Disclosure Agreements: What They Do and Don't Protect

A non-disclosure agreement (NDA) is a contract that obligates one or both parties to keep specified information confidential. They're common in employment, business negotiations, and vendor relationships, and while they're often treated as boilerplate, poorly drafted NDAs frequently fail to protect what the business actually needed protected.

Mutual vs. one-way

A one-way NDA obligates only one party — typical when only one side is disclosing sensitive information, like a company sharing proprietary information with a potential vendor. A mutual NDA obligates both parties, common when two companies are exploring a partnership or merger and both will be exchanging confidential information.

What makes an NDA actually enforceable

Courts are more willing to enforce NDAs that define confidential information reasonably specifically (rather than an unlimited, vague catch-all), that have a reasonable duration rather than claiming to last forever for information that isn't a genuine trade secret, and that carve out standard exceptions — information that was already public, already known to the receiving party, or independently developed without using the disclosed information.

What an NDA doesn't do

An NDA restricts disclosure of information — it generally doesn't, by itself, prevent someone from competing, soliciting customers, or using general skills and knowledge they gained (as opposed to specific confidential information). Businesses that actually need those broader restrictions typically need a separate non-compete or non-solicitation agreement alongside the NDA, since courts read each type of restriction narrowly and won't stretch an NDA to cover ground it wasn't written for.