A non-disclosure agreement (NDA) is a legally binding contract that establishes a confidential relationship between two parties: the party holding sensitive information and the party receiving that sensitive information. The latter agrees that the sensitive information they receive will not be made available to others.

Non-disclosure agreements are common for businesses entering into negotiations with other businesses. They allow the parties to share sensitive information without fear that it will end up in the hands of competitors. In this case, it may be called a mutual non-disclosure agreement.

Key Takeaways

• An NDA acknowledges a confidential relationship between two or more parties and protects the information they share from disclosure to outsiders.

• The NDA is common before discussions between businesses about potential joint ventures.

• Employees are often required to sign NDAs to protect an employer's confidential business information.

• An NDA may also be referred to as a confidentiality agreement.

• There are two primary types of non-disclosure agreements: mutual and non-mutual non-disclosure agreements.