When it comes to Non-Disclosure Agreements ("NDAs"), not all are created equal. There are two main types: Unilateral NDAs and Mutual NDAs.
1. Unilateral NDAs:
These are one-way agreements, meaning only one party is sharing confidential information, and only that party’s information is protected. You’ll typically see these when there’s an imbalance of power—think a big tech company sharing sensitive information with a smaller vendor. The tech giant might insist on a unilateral NDA because they have more leverage and want to avoid being tied down by confidentiality obligations themselves.
2. Mutual NDAs:
These are two-way agreements and by far the most common in freelancer and small business contexts. A mutual NDA assumes that both parties could potentially share confidential information, even if, realistically, only one side will. Mutual NDAs are also a great way to build trust—both parties are legally obligated to keep each other’s information confidential. In most cases, I’d recommend using a mutual NDA as your standard template because it sets a fair baseline for both sides.
Key Terms to Pay Attention To In an NDA
Not all NDAs are straightforward, and there are a few key terms you’ll want to double-check before signing:
1. Term (Duration):
How long does the NDA last? Some NDAs have an expiration date (e.g., 2 or 5 years), while others are perpetual, meaning confidentiality lasts forever. Be mindful of what makes sense for your industry and the type of information being shared.
2. Definition of Confidential Information:
What exactly is considered confidential under the agreement? Some NDAs define this very broadly (“any and all information shared”), while others get specific. Make sure the definition aligns with your expectations.
3. Permitted Disclosures:
Are there exceptions to confidentiality? For example, can the recipient share your confidential information with their legal or financial advisors? Most NDAs will have carve-outs for situations like this—just make sure they’re reasonable.
4. Return or Destruction of Information:
What happens to the confidential information after the NDA expires or the relationship ends? Some NDAs require the receiving party to return or destroy all materials.
5. Jurisdiction and Governing Law:
If there’s a dispute, which state or country’s laws apply? If you’re a freelancer in New York, but your counter party insists on a jurisdiction halfway across the world, that’s worth a conversation.
Bottom Line, for most freelancers and small businesses, a mutual NDA is the way to go. It’s balanced, fair, and sets the stage for a trusting business relationship. And before you sign, always give those key terms a second look—they’ll tell you a lot about the agreement you’re entering into.
Use Counsel Club to make a custom NDA for your business.
