How to Review a Non-Disclosure Agreement (NDA)
Non-Disclosure Agreements are one of the most common contracts you'll sign — and one of the easiest to get wrong. An overbroad NDA can prevent you from working in your industry, expose you to unlimited liability, or lock you into perpetual obligations you never intended. Here's what to check before you sign, and how AI can catch what you miss.
What Is an NDA?
A Non-Disclosure Agreement (NDA) is a legally binding contract that creates a confidential relationship between parties. The party sharing information (discloser) restricts the receiving party from sharing that information with others. NDAs are used before business discussions, partnerships, employment, and investment deals.
Mutual vs. One-Way NDAs
A one-way NDA protects only the discloser's information. A mutual NDA protects both parties. If you're sharing any proprietary information — which is common in partnership discussions — always push for a mutual NDA. One-way NDAs that claim to be 'standard' often aren't.
Key Clauses to Examine
Definition of Confidential Information: This is the most critical clause. Overly broad definitions can cover almost anything and restrict your normal business activities. Look for carve-outs for publicly available information, independently developed work, and information received from third parties.
Term and Duration: NDAs should have a clear end date — typically 2-5 years. Perpetual NDAs (no expiration) are a red flag unless they cover true trade secrets.
Non-Compete / Non-Solicitation Riders: Some NDAs sneak in non-compete clauses disguised as 'non-use' provisions. These can restrict your ability to work with competitors or in your field.
Remedies and Liability: Watch for clauses granting injunctive relief without proof of harm, or specifying liquidated damages that far exceed the value of the information shared.
Why AI Analysis Catches More
Human reviewers spend an average of 45-90 minutes on a single NDA. Under time pressure, they focus on obvious issues and miss subtle ones — like a "residual knowledge" clause that lets the other party use your ideas without restriction. AI analysis processes every clause simultaneously and flags risk patterns trained on thousands of contracts.
Red Flags to Watch For
- ⚠Perpetual confidentiality obligations with no expiration
- ⚠Definition of 'Confidential Information' that includes 'all information disclosed'
- ⚠Non-compete provisions hidden in non-use clauses
- ⚠Unilateral injunctive relief without proving harm
- ⚠No carve-out for independently developed information
- ⚠Requirement to return or destroy ALL copies including working notes
- ⚠Governing law in a jurisdiction unfavorable to you
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