A mutual non-disclosure agreement (NDA) is the document two businesses sign when both of them expect to share sensitive information, typically while exploring a joint venture, a supply arrangement or a possible acquisition. The idea is simple enough. The drafting is where it goes wrong, either because the NDA doesn’t protect what you actually care about, or because it commits you to things you can’t realistically do.
Why mutual NDAs are different
In a one-way NDA one side discloses and the other promises to keep quiet. In a mutual NDA each party is both discloser and recipient, and every clause cuts both ways. That changes how you should read it. A very wide definition of confidential information protects your material but also restricts what you can do with theirs. A tough remedies clause helps you if they leak and hurts you if one of your staff does. When you draft or review a mutual NDA, read each clause twice, once from each side of the table.
The definition of confidential information
Everything starts here. The definition needs to be wide enough to catch what genuinely matters (technical data, business plans, financial information, customer lists, pricing, know-how) and clear enough that both sides know where the boundaries are. Decide whether information needs to be marked as confidential. Marking gives certainty but relies on people remembering to do it, and oral disclosures in meetings are easily missed. A common compromise covers marked information plus anything a reasonable person would understand to be confidential from its nature or the circumstances of disclosure.
Alongside the contract, the general law of England and Wales protects information that has the necessary quality of confidence (broadly, it isn’t public or trivial) and that was shared in circumstances where the recipient knew or should have known it was confidential. A clear contractual definition saves you arguing about those tests.
Purpose and use
The core obligations are usually two: don’t disclose the other side’s information, and don’t use it except for the agreed purpose. The purpose clause deserves more attention than it gets. Something like “evaluating and negotiating a possible joint venture between the parties” is typical. Too narrow, and ordinary work on the deal risks breaching it; too loose, and it stops restricting anything.
Duration and survival
Two periods matter: how long disclosures are covered, and how long the obligations last once the discussions end. Fixed periods of a few years are common in commercial NDAs, but the right length depends on how long the information stays valuable. Pricing may be stale within a year, while a manufacturing process or source code may matter for much longer. It’s common to protect trade secrets for as long as they remain secret and give other information a fixed period.
Trade secrets also have some protection under the Trade Secrets (Enforcement, etc.) Regulations 2018 and the general law of confidence, but relying on those rather than the contract is harder work. If something needs long-term protection, say so in the NDA.
The standard exclusions
A mutual NDA should say what isn’t confidential. The usual four exclusions cover information that:
- is or becomes public, other than through a breach by the recipient
- the recipient already had before the disclosure
- the recipient receives from a third party who was free to disclose it
- the recipient develops independently without using the disclosed information.
They’re fair to both parties, since they stop each side being bound in respect of information it didn’t really get from the other. Many NDAs put the burden on the recipient to show an exclusion applies, often by reference to written records, and in a mutual NDA that burden falls on both of you equally.
Permitted disclosures
Each side will need to share information with its own people: directors, employees, professional advisers and possibly funders. Allow this on a need-to-know basis, provided those people are told the information is confidential and are bound to keep it so. Decide whether each party is responsible for breaches by the people it passes information to; in a mutual NDA it usually makes sense for both to be.
Include a carve-out for disclosure required by law, a court or a regulator, with an obligation to notify the other party first where that is lawful, so it can try to limit the disclosure.
Remedies and enforcement
Remedies in a mutual NDA should be the same for both sides. The general law already allows a claim for damages, an injunction to stop a breach and, in some cases, an account of the profits the other party made from misusing the information. Most NDAs add a statement that damages alone may not be an adequate remedy and that the injured party may seek an injunction.
That clause is worth having, but it shouldn’t be oversold. Injunctions are discretionary, and a court will decide for itself whether one is justified on the facts. A contractual statement about “irreparable harm” is something the court can take into account, not something that binds it. Be wary of wording that says a party can obtain an injunction without showing any loss, or an indemnity for all losses and legal costs; in a mutual NDA either of you could end up on the paying side.
Return or destruction of information
A balanced clause requires each party, on request or when discussions end, to return or destroy the other’s information, but lets it keep copies it must hold for legal or regulatory reasons and copies in automatic backups that can’t reasonably be deleted. Those retained copies stay subject to the confidentiality obligations.
Other clauses worth including
A mutual NDA should normally say that neither party is obliged to go ahead with any transaction, that no licence of intellectual property is granted by sharing information, and that information is provided without any promise about its accuracy (unless you agree otherwise). Watch for a “residuals” clause, which lets a recipient use whatever its people happen to remember from the disclosures. Larger technology companies sometimes ask for one. It can hollow out the use restriction, so think carefully before agreeing to it, even in a mutual form.
Common drafting mistakes
Uneven obligations. A document labelled mutual can still favour one side, for example where the definition, exclusions or remedies differ depending on who is disclosing. Check the clauses really are reciprocal.
A vague definition. “Anything discussed between the parties” invites arguments about what was covered and makes enforcement harder. Be specific about what matters.
Missing or loose exclusions. Without clear exclusions the recipient can’t tell what it’s free to use, and disputes follow.
A period that doesn’t fit the information. Twenty years for pricing data will meet resistance; two years for a core algorithm may leave you exposed.
A template is a reasonable starting point, but adapt it to the information each side will actually share and what it needs to do with it. If you’d like a second pair of eyes on the draft before it goes out or before you sign, you can upload it to QuickLegalCheck for a review.
Related: what the NDA review covers, and a complete sample report.