When You Actually Need an NDA (and What to Watch For Before You Sign)
September 2026
The NDA may be the most reflexively produced document in business. It shows up before introductory phone calls, gets attached to emails as a matter of habit, and gets signed without much reading because everyone assumes it is a harmless formality. Some are. The ones that are not can restrict how you run your business for years after the deal they were written for is dead.
The threshold question
An NDA is warranted when truly proprietary information, the kind you can clearly define, is about to change hands. Customer-level financials, source code, formulas, unpublished product plans, detailed pricing, pipeline data. If you cannot write one sentence describing what will be disclosed and why it would hurt to have it in a competitor's hands, the conversation probably does not need an NDA yet.
Stage matters as much as subject matter. A first exploratory meeting rarely justifies confidentiality obligations. Nobody shares the sensitive material in that meeting anyway. The right time for an NDA is the point where the discussion turns serious enough that real diligence information is about to flow, and the agreement should be scoped to that information.
Signing early and signing broad feels costless in the moment. It is not. Every NDA you sign is a standing contract that someone can wave at you later, and the broader it is, the more of your ordinary business activity it can be stretched to cover.
The terms that cause the damage
A definition that swallows your existing business. I watched a firm receive a letter asserting that its own legacy business and long-standing contacts were no longer its to use, on the theory that they had become the counterparty's confidential information. The mechanism was an NDA with a definition that covered everything exchanged or discussed, no exclusions, and language reaching business relationships themselves. The fix costs four short clauses: information that is publicly available, information you already knew, information you develop independently, and information you receive from a third party are all excluded. Where the relationship justifies it, add an express carve-out confirming that the agreement does not restrict your existing business, existing clients, or work with other parties.
No end date. Another business spent years wrestling with compliance obligations from agreements signed for discussions that had long since died, because the confidentiality terms never expired. An obligation with no end date has to be tracked forever: through employee turnover, system migrations, document retention decisions, and every future transaction where a buyer's diligence team asks what standing obligations the company carries. A fixed term of two to three years is market for most business discussions. The one legitimate exception is trade secrets, which can remain protected for as long as they qualify as trade secrets, and that carve-out can be stated in a sentence.
One-way paper. I insist on mutual agreements even when most of the information, or all of it, is coming from the other side. The reason is leverage. Most NDA disputes never reach a courtroom. They play out in letters and phone calls, with each side positioning off the contract language, and a one-way agreement hands the drafting party the entire paper arsenal while the receiving party has nothing to answer with. Made mutual, the party disclosing less holds the same contractual rights, and the exchange starts level. The letter in the first example is what an NDA fight usually looks like in practice: a demand built on drafting. Be in a position to write one back.
Restrictions that are not confidentiality at all. I have signed my share of NDAs as a buyer in small business acquisitions, and the recurring problem is provisions that have nothing to do with protecting information: non-solicitation of employees and customers, non-circumvention, exclusivity, standstills. At an early stage of negotiations these are unnecessary, and in a roll-up strategy they are dangerous. Small industries are small worlds. The same brokers, lenders, operators, and target companies appear in deal after deal, and a few broadly written non-circumvention clauses can fence you out of your own market before you have closed anything. An NDA should stay a confidentiality agreement. If a counterparty wants deal protection, that is a separate negotiation, entered with open eyes and usually with something given in return.
A smaller point that earns its space
Read the return-and-destruction clause against how your systems actually work. A flat obligation to destroy every copy is impossible for any business with email archives, backups, or regulatory retention requirements. Standard practice is to permit retention of archival and backup copies, with retained copies remaining confidential.
What this means in practice
Before signing, ask three questions. What specifically will be disclosed, and is it genuinely proprietary? When do these obligations end? Is there anything in this agreement beyond confidentiality?
Then negotiate. Make the agreement mutual, narrow the definition, add the standard exclusions, set a fixed term, and strike the provisions that belong in a different agreement. These are market positions, and most counterparties accept them without friction. A counterparty who refuses to put an end date on your obligations, or who insists on non-circumvention before a first substantive meeting, is telling you something useful about how the rest of the relationship will go.
Moeller Law PLLC advises businesses, investment advisers, and fund sponsors on contract negotiation and review.
