NDA Basics: What It Does and Doesn't Do

An NDA (also called a confidentiality agreement) is a contract in which one or both sides promise to keep certain information secret. People reach for one before sharing a business plan, a product idea, financials, or customer data. It's a sensible first step — but knowing its limits matters just as much as knowing its purpose.

What an NDA does

• Defines what counts as "confidential information" so both sides know the boundaries
• Creates a legal obligation not to disclose or misuse that information
• Gives you a contractual claim if the other side leaks it
• Signals that you take confidentiality seriously — which changes how people behave

What an NDA doesn't do

This is where expectations often outrun reality. An NDA generally does not:

• Protect an idea itself — it protects specific information, not a concept anyone could think of independently
• Stop information that's already public or that the other side already knew
• Automatically undo a leak — you can sue, but you can't un-share a secret
• Replace patents, trademarks or copyright, which protect different things in different ways

Terms worth reading before you sign

• Definition of confidential information — too broad is unenforceable, too narrow leaves gaps
• Duration — how long the obligation lasts after the deal ends
• Permitted uses and carve-outs — what the recipient is allowed to do with the information
• Mutual vs. one-way — is only one side sharing, or both?