Non-disclosure agreements (NDAs) cross almost every organisation’s desk. They turn up at the very start of business relationships, often before there is any broader contract in place, and to the untrained eye, they tend to look… very similar.
For an in-house lawyer, they are one of the more mundane tasks. They cross our desks regularly, they can be repetitive in nature, and in my opinion, are a document type that AI will inevitably master in time.
But this doesn’t mean NDAs are risk-free. Without going into legal principles, there are some common issues that we see with NDA’s that anyone in a business role can spot quickly to sense-check whether an NDA is actually doing what you think it should for your organisation.
1. Whose information is being protected?
The first question is simple but often overlooked: are you protecting only the other party’s confidential information, or both parties’ information?
In early-stage discussions, NDAs are usually intended to protect both sides. In other words, they should be mutual.
Do not just rely on the heading. Even where a document is labelled a “mutual NDA”, check whether the obligations are genuinely mutual. It is surprisingly common to see:
- broader protections for the counterparty’s information than yours
- tighter restrictions on your use than on theirs
- stronger remedies or enforcement rights for one side only
2. The purpose clause really matters
The “purpose” is often one of the few parts of an NDA that is easily customised, and it is one of the most important. This clause defines why confidential information is being shared and usually limits how it can be used. If the purpose is drafted too broadly, the other party may have rights to use your information far beyond what you intended.
A good sense-check question is: does this purpose clearly reflect the actual discussions we are having right now? If the answer is no, the scope of the NDA may be wider than you think and the party may potentially have more rights to that information than you want. Breadth of the purpose is critical!
3. Watch for non-confidentiality obligations
NDAs should generally do what they are set up to do – to protect confidential information. Be aware of extra obligations being “snuck in”, particularly where there is no wider commercial agreement in place yet. Common examples include:
- exclusivity or non-compete obligations
- restrictions on who you can talk to or do business with
- commitments about future conduct that have nothing to do with confidentiality
4. Post-term obligations: how long does confidentiality really last?
While the length of term of the NDA itself may be important, in practice often the more important question is what obligations continue after the agreement ends.
Often this is driven by the purpose of the disclosure. Where confidential information is shared for a specific, short-lived project or set of discussions, the permitted use of that information will usually be tied to that purpose. Once the purpose has been completed or falls away, use rights will often fall away naturally as well.
A useful sense-check is whether the post-term obligations align with both the purpose of the NDA and the sensitivity and value of the information being shared.
As routine as NDAs may seem, spending a few extra minutes to check key areas and having a legal eye over it can save far more time and cost later and ensures the agreement you sign actually does the job you need it to do.
