Non-disclosure agreements (NDAs) are like locks on the doors of your business secrets. Whether you’re sharing product designs, marketing strategies, or customer data, you want to make sure that sensitive information stays exactly where it belongs—confidential. But here’s the thing: an NDA is only as strong as the way it’s written.
Small businesses often use templates, rush through drafting, or overlook critical clauses. The result? Documents that look official but don’t hold up when it really counts. If the NDA has holes, it won’t protect your business when someone breaks your trust. Worse, it might give you a false sense of security while leaving you wide open to legal trouble.
Vague Definitions of Confidential Information
One of the most common mistakes in NDAs is not clearly defining what “confidential information” actually includes. If your NDA just says something broad like “all confidential materials,” that could be challenged in court for being too vague.
A solid NDA should list out specific examples. Think: business plans, pricing structures, source code, financial data, client lists, product designs. The more clearly you define what needs protection, the harder it is for someone to say, “Oh, I didn’t realize that counted.”
On the flip side, it should also clarify what’s not considered confidential—like information that’s already public or independently developed without using your secrets. That balance helps make the NDA more enforceable and fair.
Missing Time Limits
How long does the NDA last? If the agreement doesn’t spell that out, it can be tough to enforce. Some NDAs forget to include a duration entirely, which can lead to confusion about when the obligation to stay quiet actually ends.
There are typically two timeframes to include:
- The term of the agreement (how long the NDA is in effect)
- The confidentiality period (how long the receiving party has to keep the info secret—even after the agreement ends)
For example, your NDA might last for two years, but the obligation to keep trade secrets confidential could last five years—or even indefinitely in some cases. Without clear language, that timeline becomes a gray area.
Overly Broad or One-Sided Language
An NDA that tries to cover everything under the sun may not hold up in court. If it’s written too broadly—like claiming that all communication is confidential—it can look unreasonable. Courts don’t like contracts that unfairly restrict someone’s ability to work, speak, or compete unless there’s a solid reason behind it.
Similarly, if the NDA only protects one party (usually the small business) without any obligation on the other side, it may be seen as too one-sided. Mutual NDAs, where both parties agree to protect each other’s information, are often more balanced and credible.
Lack of Jurisdiction and Governing Law Clauses
Where will the dispute be handled if things go sideways? If your NDA doesn’t say, you could be stuck dealing with legal issues in a completely different state—or even country—depending on where the other party is based.
Including a governing law and jurisdiction clause in your NDA spells out what state or country’s laws apply and where any legal proceedings will take place. For small businesses, this can mean the difference between defending your NDA close to home or being dragged into an unfamiliar (and expensive) court system.
No Consequences for Breach
So someone violates the NDA—now what? If the agreement doesn’t specify the consequences of a breach, you’ll have to rely on general legal principles to make your case. That can be time-consuming and uncertain.
A well-crafted NDA should outline possible remedies if the information is leaked or misused. This can include:
- Injunctive relief (stopping the other party from continuing the breach)
- Liquidated damages (pre-agreed amounts the breaching party pays)
- Legal fees (making the other side pay your costs if you win)
Even just stating that the breach could result in “irreparable harm” and that you’re entitled to seek injunctive relief can go a long way in court.
Not Addressing Third-Party Sharing
Sometimes, the person you share confidential info with isn’t the only one who ends up seeing it. Maybe they have subcontractors, advisors, or team members who also access your materials. If your NDA doesn’t include language that covers third-party sharing, those extra hands might not be legally bound to keep quiet.
Make sure your NDA says that the receiving party can’t disclose the information to anyone else without your written permission—and that if they do, those third parties are also bound by the same confidentiality obligations.
No Signature, No Protection
It sounds simple, but it happens: an NDA is drafted, emailed, and then forgotten. Without a signature, it’s not a binding contract. Courts generally require a signed agreement to enforce confidentiality clauses, and an unsigned NDA may not hold up—even if everyone agreed in principle.
Digital signatures count. Even an email chain confirming agreement might support your claim. But nothing beats a signed and dated document that clearly outlines the terms.
Using the Wrong Template
Free NDA templates are everywhere. Some are great starting points. Others? Not so much. A template written for a giant tech company doing international deals probably isn’t the right fit for a local service business.
One-size-fits-all contracts often miss the specific needs of your business or industry. They may include overly complex legal language or skip over things that matter most to your situation. If the NDA doesn’t reflect your actual working relationship, it could create more confusion than clarity.
It’s worth having a lawyer review or customize your NDA—especially if you’re sharing high-value information or entering into long-term partnerships.
Forgetting to Update the NDA Over Time
Business evolves. Your NDA should too. What worked for your business two years ago may not cover the new types of work, collaborators, or technologies you’re dealing with today.
It’s good practice to review your standard NDA every year or whenever your business model shifts. If you’ve expanded into new markets, started sharing data in different ways, or started working with new types of partners, your NDA might need an upgrade.
Even simple changes—like adding a data protection clause or updating the governing law—can make a big difference in legal strength.
