How to Create a Non-Disclosure Agreement (NDA)

What is a non-disclosure agreement?

A non-disclosure agreement (NDA), also called a confidentiality agreement, is a legally binding contract between two or more parties that restricts the sharing of confidential information. When you sign an NDA, you agree not to disclose specific information to unauthorized people or organizations.

NDAs are one of the most common legal documents in business. They're used before job offers, during partnership discussions, when pitching to investors, when hiring contractors, and in any situation where sensitive business information changes hands. Without an NDA, there's no legal obligation to keep shared information private.

When do you need an NDA?

You should consider an NDA whenever you're sharing information that could harm your business if disclosed. Common situations include:

• Hiring employees — protect trade secrets, client lists, and proprietary processes that employees will access
• Working with contractors — freelancers and agencies often see sensitive code, designs, financial data, or business strategies
• Pitching to investors — sharing business plans, financial projections, and product roadmaps during fundraising
• Business partnerships — exploring joint ventures, mergers, or collaborations that require sharing proprietary information
• Product development — when outside developers, designers, or consultants work on unreleased products
• Client engagements — when clients share their proprietary data with you for a project

For more detail on when NDAs are and aren't appropriate, see our guide on when you need an NDA.

Key clauses every NDA should include

A well-drafted NDA needs these essential elements to be effective and enforceable:

1. Identification of the parties

Clearly name all parties entering the agreement. Use full legal names — not nicknames or abbreviations. For businesses, use the registered company name and include the address. Specify who is the "Disclosing Party" (sharing information) and who is the "Receiving Party" (receiving and protecting it). In a mutual NDA, both parties are both disclosing and receiving.

2. Definition of confidential information

This is the most critical clause. Define exactly what information is considered confidential. Be specific enough to be enforceable but broad enough to cover everything you need to protect:

• Trade secrets and proprietary formulas
• Client lists and customer data
• Financial information and projections
• Product plans and roadmaps
• Source code and technical specifications
• Marketing strategies and pricing
• Business processes and internal methods

Avoid defining confidential information as "everything" — courts view overly broad definitions as unreasonable and may refuse to enforce them.

3. Obligations of the receiving party

State what the receiving party must do (and must not do) with the confidential information. Typical obligations include:

• Not disclosing the information to any third party
• Using the information only for the stated purpose
• Taking reasonable measures to protect the information
• Limiting internal access to employees who need to know
• Returning or destroying all materials upon request or termination

4. Exclusions from confidential information

Standard NDAs exclude certain types of information from the confidentiality obligation:

• Information that is already publicly available
• Information the receiving party already knew before the agreement
• Information received independently from a third party
• Information independently developed by the receiving party
• Information required to be disclosed by law or court order

5. Duration of the agreement

Specify how long the confidentiality obligation lasts. Most NDAs run between 1 and 5 years. The right duration depends on what you're protecting — a product launch date might only need 6 months, while a trade secret formula could need indefinite protection. Courts are more likely to enforce NDAs with reasonable time limits.

6. Remedies for breach

Define what happens if someone breaks the agreement. Common remedies include injunctive relief (a court order to stop the disclosure), monetary damages, and payment of legal fees. Including this clause gives teeth to your NDA and signals that you take confidentiality seriously.

Step-by-step: Create your NDA

Step 1: Choose mutual or unilateral

Decide which type of NDA you need. If only one party is sharing confidential information (e.g., an employer with a new hire), use a unilateral NDA. If both parties will share sensitive information (e.g., two companies exploring a partnership), use a mutual NDA. See our detailed comparison of mutual vs unilateral NDAs.

Step 2: Identify and name the parties

Use full legal names and addresses. For individuals, include their full name and mailing address. For companies, use the registered business name, registration number if applicable, and principal address. Specify who is the disclosing party and who is the receiving party.

Step 3: Define what's confidential

List the categories of information that are protected. Be specific — "all business information" is too vague. Instead, list "client lists, pricing models, product source code, and marketing strategies." You can also reference specific projects or engagements.

Step 4: Set the terms and duration

State the purpose of the disclosure (e.g., "for the purpose of evaluating a potential business partnership"), the duration of the confidentiality obligation, and what happens when the agreement ends (return or destroy all materials).

Step 5: Add standard legal provisions

Include governing law (which state/country's laws apply), dispute resolution method (courts or arbitration), severability (if one clause is invalid, the rest still applies), and whether the agreement can be assigned to another party.

Step 6: Review, sign, and store

Have all parties review the final document. For high-stakes agreements, have an attorney review it. Both parties sign and date the agreement. Each party keeps a signed copy. Store your NDAs securely — you'll need them if a dispute arises.

Mutual vs unilateral NDA

A unilateral NDA (one-way) protects one party's information. The disclosing party shares confidential information, and the receiving party agrees not to disclose it. This is the most common type — used for employee NDAs, contractor agreements, and investor pitches.

A mutual NDA (two-way) protects both parties. Both sides share confidential information and both agree to keep it secret. Common in business partnerships, joint ventures, merger discussions, and any negotiation where both parties reveal sensitive data.

For a detailed breakdown with examples, read our guide on mutual vs unilateral NDAs.

What makes an NDA enforceable?

For an NDA to hold up in court, it needs to meet these criteria:

• Reasonable scope — the definition of confidential information should be specific, not "everything"
• Reasonable duration — 1-5 years is typical. Indefinite NDAs are harder to enforce unless protecting genuine trade secrets
• Consideration — both parties must receive something of value. For employees, the job itself is consideration. For contractors, the contract work is consideration
• Clear language — vague or ambiguous terms weaken enforceability. Use plain, specific language
• Proper execution — signed and dated by all parties with the authority to sign
• Legitimate purpose — the NDA must protect genuinely confidential information, not be used to prevent competition or hide illegal activity

Common NDA mistakes to avoid

• Being too vague — "all information" as the confidential definition is nearly unenforceable. Be specific.
• Forgetting exclusions — always include standard exclusions (public info, prior knowledge). Without them, the NDA may seem unreasonable to a court.
• No end date — every NDA should have a clear duration. Open-ended obligations are harder to enforce.
• Using the wrong type — don't use a unilateral NDA when both parties are sharing. It leaves one party unprotected.
• Not getting signatures — an unsigned NDA is just a piece of paper. Make sure every party signs.
• Waiting too long — get the NDA signed before sharing any confidential information, not after.

Creating an NDA with AI

The fastest way to create an NDA is to describe your situation. Just type something like "create a mutual NDA for a software development partnership" and AI generates a complete, structured template in seconds. You can refine specific clauses with follow-up prompts or switch to the drag-and-drop editor for precise formatting. Try it free.