What Is An NDA? How To Safeguard Information (2026)

Types of NDAs

NDAs are usually unilateral or mutual. The situation dictates whether to use a mutual vs. unilateral NDA.

A mutual NDA obligates multiple parties to keep information confidential. It is often called “mutual” because the parties disclose information to each other and they “mutually” agree to keep each other’s information secret.

A unilateral NDA only obligates one party to preserve the information’s secrecy. A unilateral NDA might restrict one party from disclosing information in exchange for a payment from the other party.

Key Components of a Non-Disclosure Agreement

To be considered valid, an NDA must meet certain requirements. First, it must contain terms that all parties voluntarily agreed on. This is called “mutual assent.”

All the parties must also promise to do something or refrain from doing something they would otherwise be free to do. In a mutual NDA, for example, each party agrees to refrain from disclosing the protected information.

Finally, the contract must be reasonably clear. The terms should describe the information protected from disclosure and how the information may or may not be handled by the parties.

When Do You Need an NDA?

What is an NDA used for? An NDA can work for any legal purpose that calls for secrecy. They may be used for many types of data, including trade secrets, confidential financial information and lawsuit settlement terms.

Limitations of NDAs and Consequences of Breaking One

Many states restrict the use of NDAs. When a state statute prohibits the subject matter of an NDA, the state’s courts will refuse to enforce it. For instance, under Utah law, NDAs cannot be used to block employees from disclosing sexual assault or harassment.

If the subject matter is permitted, the NDA is breached when a party discloses the protected information. The non-breaching party may be able to file a lawsuit against the breaching party. A court could then award monetary damages and issue an injunction blocking further dissemination of the information.

Learn More About NDAs and Other Contracts

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