Confidentiality Agreement (NDA): What It Is, When to Use It, and How to Draft One

A Non-Disclosure Agreement (NDA) is a legally binding contract that ensures certain information remains confidential between the parties involved. Also called a confidentiality agreement, an NDA prevents one or both parties from sharing or misusing sensitive, proprietary, or private information.

NDAs are commonly used when confidential data — such as business strategies, financial records, trade secrets, or client lists — needs to be shared during negotiations, collaborations, or partnerships.

NDAs are widely used across industries and business sizes, including:

• Startups sharing a pitch with investors
• Freelancers and consultants working on internal company projects
• Tech companies protecting product roadmaps or source code
• E-commerce brands partnering with suppliers or logistics providers
• HR teams handling employee onboarding with access to private data

There are two main types of NDAs:

• Unilateral NDA
  One party agrees not to disclose the other party’s confidential information.
  Example: A freelancer signs an NDA before working with a company.
• Mutual NDA
  Both parties agree not to disclose shared information.
  Example: Two companies exploring a partnership or joint venture.

You’ve probably seen the terms Non-Disclosure Agreement (NDA) and Confidentiality Agreement used interchangeably — and in most cases, that’s completely fine.

But are they really the same thing?

Both NDAs and confidentiality agreements are legal contracts designed to protect confidential or proprietary information from being shared with third parties.

In practice, they serve the same purpose: to establish trust, clarify expectations, and reduce the risk of data leaks.

While the meaning is identical, the preferred term may vary depending on geography or legal tradition:

• “NDA” is more commonly used in the United States and in tech/startup environments.
• “Confidentiality Agreement” is often preferred in Europe, especially in legal or corporate contexts.

In the UK and EU, “confidentiality agreement” might sound more formal, but it functions the same as an NDA.

Sometimes, the terms are used to describe different scopes:

• An NDA might suggest a one-way disclosure (e.g. a freelancer agrees not to share client data).
• A confidentiality agreement may imply a mutual exchange of sensitive info.

However, this isn't a legal rule — the actual wording of the agreement matters far more than the title.

It’s not what you call the document — it’s what’s inside.
Make sure the agreement clearly outlines:

• What information is considered confidential
• How that information may or may not be used
• How long the obligations last
• What happens if the agreement is broken

A well-drafted NDA (or confidentiality agreement) is more than just a formality — it’s a legal shield. To ensure it’s effective and enforceable, there are several essential clauses that should always be included.

Here’s a breakdown of the most important ones:

Clearly define what types of information are considered confidential. This may include:

• Financial data
• Technical documents
• Business strategies
• Client lists
• Trade secrets
• Intellectual property

Be specific to avoid ambiguity and potential loopholes.

State exactly what the party receiving the information is allowed (and not allowed) to do with it.

Typical obligations include:

• Not disclosing the information to third parties
• Only using the information for agreed purposes
• Taking reasonable steps to protect the information

Outline if there are any exceptions — for example, disclosures required by law or to employees/contractors bound by similar confidentiality obligations.

Specify how long the confidentiality obligation lasts. This could be:

• A fixed number of years (e.g. 2–5 years)
• Until the information becomes public through no fault of the receiving party
• Indefinitely, for sensitive trade secrets

Clarify what does not count as confidential, such as:

• Information already in the public domain
• Information independently developed without access to the confidential data
• Info disclosed with the disclosing party’s written consent

Explain what happens if the agreement is violated. This might include:

• Legal action
• Financial damages
• Injunctive relief (court order to stop disclosure)

Identify which country’s laws apply to the agreement.
Example: “This Agreement is governed by the laws of England and Wales.”

Both parties should sign the agreement to make it legally enforceable.

Creating an NDA might seem complex, but it doesn’t have to be. Whether you're protecting sensitive client data, product roadmaps, or strategic plans, a clear and well-structured NDA will help secure your business relationships.

Here’s a simple, step-by-step guide to drafting your own NDA:

Start by naming the parties entering into the agreement — the disclosing party (sharing the confidential info) and the receiving party (who agrees to keep it confidential).

If the NDA is mutual, both parties will play both roles.

Be as specific as possible about what information must be protected. This may include:

• Technical documents
• Business processes
• Pricing structures
• Customer data
• Designs or prototypes

State how the information can and cannot be used. Include:

• The purpose for which the data can be accessed
• Limitations on sharing with third parties
• Required security measures

Define how long the agreement lasts. For example:

• Confidentiality obligations may last 2–5 years
• Some clauses (like protecting trade secrets) may apply indefinitely

Explain what happens if either party breaks the agreement. This could include:

• Legal action
• Financial penalties
• Termination of contract or collaboration

State which country or region’s law applies in the event of a legal dispute. This is essential for enforcement.

Both parties must sign the document to make it legally binding.

Use a certified electronic signature platform like Yousign to sign your NDA securely and compliantly — no printing or scanning required.

A Non-Disclosure Agreement (NDA) is not just a formality — it's a legally binding contract in the UK, provided it meets certain conditions.

Whether you're a freelancer, startup founder, or business owner, understanding the legal framework behind NDAs is key to protecting your confidential information.

Yes — NDAs are enforceable under UK contract law, as long as they follow the standard principles of any valid contract:

• Mutual consent: Both parties must agree to the terms
• Clear terms: The agreement must define what is confidential and what isn’t
• Lawful purpose: The NDA must not be used to cover up illegal or unethical practices
• Consideration: Something of value must be exchanged (e.g., employment, services)

An NDA cannot be used to:

• Silence whistleblowers or prevent reports of wrongdoing
• Prevent someone from complying with a legal obligation (e.g., court orders)
• Restrict disclosures that are in the public interest

For example: An employee cannot be prevented from reporting harassment or fraud, even if they signed an NDA.

Yes. Under UK law and eIDAS regulation in the EU, electronic signatures are legally binding. This means you can sign NDAs digitally — no paper, printing, or scanning required.

Yousign offers a secure and compliant way to sign NDAs online, with tamper-proof audit trails, identity verification, and GDPR-compliant storage.

While NDAs are powerful tools to protect confidential information, they only work if both parties respect the agreement. So what happens when one party breaches the contract?

Whether intentional or accidental, violating an NDA can lead to serious legal and financial consequences.

An NDA can be breached in several ways, such as:

• Disclosing confidential information to third parties
• Using the information for unauthorised purposes
• Failing to secure the data, resulting in accidental leaks
• Sharing trade secrets with competitorr

To take legal action, the party harmed must typically prove:

• The information was confidential as defined in the NDA
• The other party accessed or received that information
• The information was disclosed or used outside the agreed terms
• Damages or loss resulted from the breach

Depending on the agreement and local laws, consequences may include:

• Injunctions to stop further disclosure
• Financial compensation for damages caused
• Termination of contracts or partnerships
• Reputational damage to the party at fault

In some cases, courts may order the violating party to pay punitive damages if the breach was intentional and caused serious harm.

To reduce the risk of NDA breaches:

• Use clear and specific language in your NDA
• Only share information on a need-to-know basis
• Track all communication and access to confidential data
• Use digital signing solutions like Yousign that provide audit trails and legally valid proof of consent

Not sure if you need an NDA? If you’re sharing sensitive business information with anyone outside your organisation, the answer is usually: yes.

Confidentiality agreements are useful in a wide range of professional situations — not just for large corporations, but also for startups, freelancers, and SMEs.

• Startup pitch meetings
  Protect your business idea when discussing it with investors or advisors.
• Hiring freelancers or consultants
  Ensure they don’t share client data, internal processes, or source code.
• Employee onboarding
  Prevent staff from disclosing internal documents, strategies, or trade secrets.
• Business partnerships and joint ventures
  Set boundaries around what can and cannot be shared during collaboration.
• Mergers and acquisitions
  Secure sensitive financial, legal, or operational information during due diligence.
• Supplier and vendor contracts
  Avoid leaks of pricing, terms, or product details to competitors.
• Tech development or product design
  Protect intellectual property, prototypes, or beta features during testing.

In a world where information is power, protecting yours is essential.

A well-written Non-Disclosure Agreement (NDA) helps you:

• Secure confidential data
• Build trust with partners, employees, and collaborators
• Prevent misuse of business-critical information
• Maintain your competitive edge

And with a reliable, legally binding electronic signature platform like Yousign, managing NDAs becomes simple, fast, and secure — no printing, scanning, or mailing required.

Whether you’re a freelancer, startup founder, or growing enterprise, having NDAs ready to use (and sign) is a must for professional peace of mind.