What an NDA Actually Does
An NDA — also called a confidentiality agreement — is a legally binding contract that prevents you from sharing certain information with outside parties. In exchange for access to sensitive information, you agree to keep it private.
NDAs are common in employment, freelancing, business partnerships, and investment discussions. They are normal and not inherently concerning — but the details matter enormously.
The 6 Things to Check in Every NDA
1. What Information Is Covered?
Look for the definition of Confidential Information. Some NDAs define it narrowly — only documents marked as confidential. Others define it so broadly that virtually any information you learn about the company is covered. A definition like "all information disclosed in any form" gives you almost no room to breathe.
2. How Long Does It Last?
NDAs always have a term — the length of time you must keep information confidential. One to three years is standard for business NDAs. Perpetual NDAs — ones that last forever — are unusual and worth pushing back on, especially for general business information that becomes outdated quickly.
3. Is It One-Way or Mutual?
A one-way NDA protects only one party's information — usually the company asking you to sign. A mutual NDA protects both parties. If you are sharing your own sensitive information during the relationship, push for mutual protection. A one-way NDA in a partnership context is a red flag.
4. What Are the Exceptions?
Good NDAs always include exceptions — situations where you are allowed to share the information. Standard exceptions include information that is already publicly known, information you already knew before signing, and information you are legally required to disclose such as in a court proceeding. If an NDA has no exceptions, treat that as a serious warning sign.
5. What Happens If You Break It?
Look for the remedies section. Most NDAs allow the other party to seek an injunction — a court order to stop you from disclosing information — plus financial damages. Some NDAs include specific penalty amounts. Knowing what you are risking helps you evaluate whether the terms are reasonable.
6. Which State's Laws Apply?
The governing law clause tells you which state's legal system will be used if there is ever a dispute. This matters more than people realize. Some states have very employee-friendly laws around NDAs. Others enforce them strictly. If the governing law is in a state you have no connection to, that alone is worth discussing.
Common NDA Red Flags
- Overly broad definition of confidential information with no carve-outs
- Perpetual duration with no end date
- Non-compete language buried inside what appears to be a simple NDA
- No exceptions for publicly known information
- Requirement to notify the company before complying with legal subpoenas
It Is Okay to Ask Questions
Asking for clarification on an NDA is completely normal and professional. You can ask why certain language is included, request modifications to overly broad definitions, or ask for a mutual version if you are sharing sensitive information too. Any party that refuses to discuss their NDA terms at all is giving you important information about how they operate.
Understand It Before You Sign It
The most important rule: never sign something you do not understand. If specific clauses in an NDA are confusing you, paste them into SimpleClause for an instant plain-English breakdown. Understanding what you are agreeing to takes minutes — and could save you significant problems later.