non-disclosure agreement (NDA)

Non-disclosure agreements (NDAs) are agreements in contract law where parties agree that certain information will remain confidential. As such, an NDA binds a person who has signed it and prevents them from discussing any information included in the contract with anyone not authorized by the NDA. NDAs are commonly used to protect trade secrets, business negotiations, client information, and sometimes hide undesirable information. Sharing information in spite of an NDA qualifies as a breach of contract and can open the breaching party up to a lawsuit. An NDA can continue indefinitely or can include a duration clause that stipulates an end date of the agreement.

Limitations on NDA Enforcement

Generally, NDAs will be enforced by a court, but some statutes and public policy may prevent the enforcement of an NDA. For example, many NDAs will be voided or partially so regarding criminal acts. Often NDAs may be unenforceable unless certain procedural requirements are met. For example, the Speak Out Act of 2022 prevents the enforcement of NDAs regarding sexual harassment unless the NDA was signed after a dispute occurs, meaning a blanket NDA will not prevent disclosure in new sexual harassment disputes. NDAs for sexual harassment will also not be bound to arbitration clauses. Further, some limitations may arise in some jurisdictions on the length of an NDA, the amount of damages, or scope of NDAs. For example, the National Labor Relations Act may prevent overbroad NDAs involving employee information or preventing future conduct of the employee.

Breach and Termination of NDA

If someone breaches an NDA, the damages can be quite substantial depending on the circumstances, and a person seeking to enforce an NDA may be able to receive a preliminary injunction. A person can breach an NDA without disclosing confidential information if the NDA sets out further parameters. For example, many NDAs prevent employees from publicly criticizing employers after termination. NDAs often will have time limits, after which the NDA obligations will terminate.

[Last updated in April of 2023 by the Wex Definitions Team]