NDAs Explained: When Does Your Business Actually Need One?

Non-disclosure agreements get thrown around a lot in business, but they're not always necessary — and a badly drafted one is worse than none. Here's when your business genuinely needs an NDA.

What an NDA does

A non-disclosure agreement (NDA), sometimes called a confidentiality agreement, is a contract in which one or both parties agree to keep certain information secret and use it only for an agreed purpose. It turns an informal 'please keep this quiet' into an enforceable obligation.

When you should use one

• Sharing a business plan or financials with a potential investor
• Discussing a product idea with a manufacturer or developer
• Bringing in a contractor who will see sensitive systems or data
• Exploring a partnership, acquisition or joint venture
• Letting an employee access trade secrets or client lists

One-way or mutual?

If only one side is sharing confidential information, a one-way (unilateral) NDA is appropriate. If both sides will exchange sensitive information — common in partnership or M&A talks — a mutual NDA protects everyone. Our template supports both.

What a good NDA must get right

• A clear definition of what counts as confidential
• A specific, lawful purpose for the disclosure
• A sensible time limit on the obligations
• Carve-outs for information that is already public or independently known

Frequently asked questions

How long should an NDA's confidentiality obligations last?

It depends on the information — trade secrets might justify indefinite protection, while time-sensitive commercial information often has a defined term, commonly a few years.

Is a verbal NDA enforceable?

It can be under general contract principles, but proving the exact terms is far harder without a written agreement — always put an NDA in writing.