Documents · Glossary
What clauses does an NDA need?
Six do the work: what counts as confidential information, what the receiving party may use it for, what is excluded, who inside the receiving organisation may see it, how long the obligation lasts, and what happens to the material when the discussion ends. Everything else in a typical NDA is standard boilerplate.
Most NDAs are ten pages long and only about two of them decide anything. Knowing which two makes the review five minutes instead of an afternoon.
Nuwan Madhusanka · Co-founder
3 min read · Published
Definition and permitted use
The definition says what is covered. Too narrow and the thing you actually shared falls outside it; too broad, such as everything disclosed in any form, and it becomes unenforceable in practice because nobody can comply. Permitted use is the clause people skip and should not: it says the information may be used only to evaluate the specific opportunity, which is what stops a party learning something in a partnership discussion and building it themselves.
Exclusions are standard and worth reading
Four exclusions appear in almost every NDA: information already public, information the receiver already had, information received legitimately from somebody else, and information developed independently without using yours. They are reasonable, and they are also the escape route, so the one to check is independent development, since a party with a large research team can often claim it. Requiring written evidence for that claim is a fair amendment.
Duration, people and the end of the discussion
Say how long the obligation survives, typically three to five years from disclosure, and note that trade secrets are often carved out to last indefinitely. Say who inside the receiving organisation may see it, usually employees and advisers with a need to know who are themselves bound. And say what happens when talks end: return or destroy the material, with a carve out for copies held in routine backups, because otherwise you are asking somebody to promise something no IT department can deliver.
Questions people ask
How long should confidentiality last?
Three to five years from disclosure is the common range for commercial information, because most of it stops being sensitive within that window. Perpetual obligations are hard to enforce and hard to comply with. Genuine trade secrets are usually carved out and protected for as long as they remain secret.
Mutual or one way?
Mutual if both sides will share anything, which is almost always true once a conversation gets real. A one way NDA is right when only one party is disclosing, such as briefing a supplier. Sending a one way agreement into a genuinely two way discussion usually costs more in negotiation than the mutual version would have.
Can an NDA stop somebody using AI tools?
You can require that confidential information is not entered into third party services, which is the substance of what people mean. Whether it can be policed is another matter, so pair it with a practical instruction rather than relying on the clause alone. Naming the concern explicitly is better than a general prohibition nobody reads.
Do I need a residuals clause?
It is common in technology deals and it is a significant concession: it lets the receiving party use general knowledge retained in an employee's memory. If you are the discloser, resist it or narrow it. If you are receiving, it is genuinely useful, because you cannot ask engineers to forget what they learned.
Is an NDA enforceable if it is signed electronically?
Yes, in the same way any other agreement is. The electronic signature statutes apply to it like anything else, and the practical question is the same: could you prove who signed and what they signed, which is a question about your audit trail rather than about the NDA.
Should the NDA name the opportunity?
Yes, in the permitted use clause. A defined purpose is what gives the agreement teeth: without it, use is limited by nothing in particular, and the clause that was meant to stop somebody building your idea does not say so.
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Create a document with OneCraftRelated questions
- Mutual against one way NDAA one way NDA protects one discloser. A mutual NDA protects both. Which to use, and why sending the wrong one costs more time than it saves.
- SOW against MSA: statement of work and master agreementA master agreement carries the legal terms once. A statement of work carries one piece of work: scope, deliverables, acceptance and price.
- Retainer against fixed feeA retainer buys availability every month. A fixed fee buys a defined deliverable. What each rewards, and the rollover clause that decides it.
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