5 NDA Clauses Every Founder Should Understand Before Signing
Non-disclosure agreements are one of the most common contracts founders encounter. Whether you're pitching to investors, hiring contractors, or exploring a partnership, you'll likely be asked to sign an NDA. But not all NDAs are created equal.
1. Definition of Confidential Information
This clause defines what's actually protected. Watch out for definitions that are too narrow (only covering "written" disclosures) or too broad (covering "any information shared in any form"). A good NDA should clearly define the scope.
2. Exclusions from Confidentiality
Standard exclusions include information that:
- Was already publicly available
- Was independently developed
- Was received from a third party without restriction
Red flag: If the NDA has no exclusions, you could be bound to protect information that's already public knowledge.
3. Term and Duration
How long does the obligation last? Common durations range from 1 to 5 years. Perpetual NDAs exist but can be unreasonable for general business discussions. Make sure the term is proportionate to the sensitivity of the information.
4. Return or Destruction of Materials
What happens when the relationship ends? A well-drafted NDA specifies whether you must return, destroy, or certify destruction of confidential materials. Without this clause, ambiguity can lead to disputes.
5. Remedies and Jurisdiction
This clause specifies what happens if someone breaches the NDA. Key elements:
- Injunctive relief — Can the disclosing party get a court order to stop further disclosure?
- Jurisdiction — Where would any lawsuit be filed?
- Attorney's fees — Who pays legal costs in a dispute?
Takeaway
Before signing any NDA, take five minutes to check these clauses. An AI contract review tool can flag unusual terms and help you understand what you're agreeing to — without needing to schedule a call with your lawyer.
