How to Create a Non-Disclosure Agreement (NDA)

A non-disclosure agreement (also called a confidentiality agreement) is a contract in which one or both parties agree not to disclose or misuse information they receive. It is typically signed before sensitive information changes hands: pitching an investor, evaluating a partnership, onboarding a contractor, or discussing an acquisition.

An NDA does not make information secret on its own — it creates a contractual obligation and a remedy if that obligation is broken. It works best alongside good practice: sharing only what is necessary and marking confidential material clearly.

• One-way (unilateral): only one party discloses. Common when a company shares information with a contractor, employee or potential buyer.
• Mutual (bilateral): both sides share and both are bound. Common in partnership or joint-venture discussions.

If both sides will share anything meaningful, a mutual NDA is usually faster to agree on because it feels balanced.

Definition of confidential information

This is the heart of the NDA. Too narrow and important information is unprotected; too broad ("all information of any kind") and a court may find it unreasonable. A practical approach is a clear general definition plus examples: product roadmaps, source code, pricing, customer lists, financial data, and anything marked or reasonably understood to be confidential.

Standard exclusions

Almost every NDA excludes information that is already public, was already known to the recipient, is independently developed, or is received lawfully from a third party. Including these makes the agreement more reasonable and more enforceable.

Permitted use

Limit use to a stated purpose — for example, "solely to evaluate a potential distribution partnership." This prevents the recipient from using the information to compete.

Who can see it

Allow disclosure to employees, advisers and contractors who need to know and are bound by similar duties, and make the recipient responsible for them.

Compelled disclosure

Allow disclosure when legally required (for example, by subpoena), with prompt notice to the discloser where the law permits.

Duration

Two to five years is common for business information. Trade secrets are often protected for as long as they remain trade secrets. Choose a term that fits how long the information stays valuable.

Return or destruction

Require the recipient to return or destroy confidential materials at the end of discussions or on request, with a reasonable exception for routine backups.

Remedies, governing law and signatures

Most NDAs state that a breach may cause irreparable harm and allow the discloser to seek an injunction. Name the governing province or state and have both parties sign — electronic signatures are generally fine. See how to sign a PDF online.

Canada

• Courts generally enforce reasonable confidentiality obligations, but they scrutinise restrictive covenants such as non-competes. Don't hide a non-compete inside an NDA.
• Ontario prohibits most non-compete agreements with employees under its Employment Standards Act, 2000 (as amended in 2021), with limited exceptions. Other provinces have their own rules.
• Quebec agreements are governed by the Civil Code of Québec, and French-language requirements may apply to certain contracts.

United States

• NDAs with employees and contractors should not stop people from reporting possible violations of law to government agencies. Under the federal Defend Trade Secrets Act (18 U.S.C. § 1833(b)), employers who don't give the required whistleblower-immunity notice can lose the right to certain damages and attorney's fees against an employee.
• Some states limit confidentiality clauses that cover harassment or discrimination — California and New York among them — and the federal Speak Out Act limits enforcement of pre-dispute NDAs in sexual harassment and assault claims.
• State law varies widely on non-competes; California generally voids them.

A Vancouver hardware startup wants a US manufacturer to quote on a new device. Only the startup is sharing, so it uses a one-way NDA:

• Confidential information: CAD files, bill of materials, target pricing and launch timeline.
• Purpose: solely to prepare a manufacturing quote.
• Term: three years, with trade secrets protected for as long as they remain secret.
• Governing law: British Columbia.
• Return: files deleted within 30 days if no contract is signed.

• Sharing information before the NDA is signed.
• Defining confidential information so broadly it becomes unreasonable.
• Leaving out the standard exclusions.
• No defined purpose, so the recipient can arguably use the information for anything.
• Adding non-compete or non-solicit terms without checking whether they're enforceable where you are.