are nondisclosure agreements enforceable?
Written by Law on Call Staff | Reviewed by Nathan Askins |Last Updated December 15, 2025
Nondisclosure agreements, or NDAs, are legal contracts meant to protect private information from being made public.
Often used in the business world, NDAs can be legally binding, but in some instances, they’ve been found to be unenforceable.
If you want an NDA to hold up, there are a few key rules you’ll need to follow. Let’s break them down.
Main Takeaways
- Nondisclosure agreements only protect confidential information if they clearly define what’s protected.
- NDAs cannot prevent the disclosure of illegal activity, or information that is already public.
- Vague definitions, coerced signatures, lack of consideration, or poor internal safeguards can make NDAs hard to enforce in courts.
What is a nondisclosure agreement?
A nondisclosure agreement (NDA) is a legal contract where one or more parties agree to keep certain information confidential. NDAs clearly define the kind of information that is to be kept private, and what can be shared. Most NDAs include some type of penalty, usually financial, if the contract is broken and confidential information is revealed to outside parties.
key reasons for using ndas
Nondisclosure agreements are generally used to:
- Protect intellectual property and business trade secrets.
- Control who can access or share proprietary information.
- Keep employee and customer data from being used by former employees or unauthorized parties.
- Establish a legal remedy if the contract is broken.
Types of NDAs
There are three types of nondisclosure agreements: unilateral, bilateral, and multilateral. Which type to use depends on the complexity of your situation.
Unilateral NDA
Often called a one-way NDA, it’s most commonly used when a business is pitching an idea to an investor. It’s also used to ensure employees don’t disclose proprietary company information to an outside party.
bilateral nda
This type of NDA is used by two parties, most often regarding a trade deal, forming a partnership, or discussing a merger.
multilateral nda
Used in complex business deals involving three or more parties, a multilateral NDA lets everyone share confidential information safely under a single agreement.
Everything your small business needs.
How to Make an NDA Legally Binding
To make an NDA legally binding, it must clearly outline the essential elements that give it legal force. In most cases, that means following a few key steps:
What to look out for
- Identify All Parties Involved
List the names, addresses, and other important information of every party who will be involved with the NDA. Failing to pinpoint exactly who’s involved breach with no legal consequence. - Clearly Define What Information is Confidential
In order for certain information to remain private, the NDA must address exactly what that information is. Overly broad or vague definitions of what will remain confidential makes the contract easier to break, and harder to enforce in a court of law. - Address Penalties for a Breach
Each party needs to know what they stand to lose if the NDA is broken. Penalties can range from loss of a job to financial reimbursement. - Set a Timeline for Enforcement
In general, NDAs don’t last forever. Courts usually require NDAs to have a reasonable time frame (two to five years is common). If an agreement tries to restrict information for decades, it becomes harder to enforce because a court might not see the information as truly confidential. - Consideration and Termination
An NDA is a contract, so both sides must get something of value. This can be as simple as offering someone a job. But if the NDA is signed after the person is already hired, you need to give something extra, like a bonus, to make it valid. The NDA should also say that it still applies even after the main contract or the person’s job ends.
When Are NDAs Unenforceable?
While NDAs are common in the business world, signing one doesn’t always mean that it will be enforceable in court. Several oversteps and oversights can lead to an agreement that isn’t legally sound.
issues to avoid
- Illegal Activity
NDAs cannot prevent individuals from whistleblowing, which is the act of reporting illegal activity or safety violations to government authorities. - Public Information
An NDA generally cannot protect information that the person already knew before signing. If a person can prove they had prior knowledge before signing the NDA, then generally the NDA usually can’t be enforced for that specific information. - Overly Broad or Unreasonable Terms
NDAs that are too vague, overly long in duration, or excessively restrictive on employees are often unenforceable because they unfairly limit a person’s ability to work because they fail to define what information is truly protected. - Coerced or Unsigned Agreements
If a party is forced to sign an NDA under fear of losing their job or other penalties, the agreement may be invalid. Same goes for NDAs that lack a proper signature. - Lack of Consideration
An NDA is only valid if there is a bargained-for exchange. For employees, this requirement is usually met if they sign the NDA when they’re hired. But if the NDA is signed after they’ve already started working, it can raise legal and enforcement problems if there was no bargained-for exchange.
What Happens if An NDA is Breached?
In general, if an NDA is breached, legal action may be taken by the aggrieved party. However, court rulings can hinge on how specific the NDA was, how the confidential information was defined, and how the party that crafted the nondisclosure agreement trained the people who were signing it. In some cases, the court may find that the agreement wasn’t breached at all.
Below are three real-world examples that illustrate how courts may view NDAs in different circumstances.
Example 1: Well-Crafted NDA Holds Up In Court
A recent example of an NDA holding up in court is Alabama Aircraft Industries Inc, et al v. The Boeing Company (2025). The lawsuit was filed because Boeing signed an NDA that clearly stated they were not to share specific trade secrets while both parties were bidding on an Air Force contract. However, to get a leg up, Boeing shared the confidential information, which broke the agreement, and as a result, the court ordered Boeing to pay $1.3 million to the plaintiffs.
Example 2: Trade Secrets Aren’t Clearly Defined
In Insulet Corp. v. EOFlow (2024), Insulet argued that a rival company stole trade secrets after hiring former employees. Ultimately the case ended up in Federal Court. The judges ruled against Insulet, saying the trade secrets under the NDA were vague and overly broad. This case showed that NDAs must be very specific regarding the information that needs to remain confidential.
Example 3: Weak Internal Procedures Can Invalidate an NDA
The case of Taylor Made Express, Inc. v. Kidd (2024), Taylor Made Express, Inc., claimed a former employee used her insider access to copy customer information without permission. The court found that since Taylor Made Express didn’t take steps to protect its own data, the trade secret claims were weak. This shows that companies must have solid policies and practices for keeping information private and the NDA enforceable.
Frequently Asked Questions
In most cases, yes. NDAs are generally stronger when a term is set. Two to five years is the typically accepted time frame, but some NDAs for highly sensitive information can last indefinitely. It should be noted that this the time frame for NDAs may vary by state.
Generally, no. NDAs are meant to protect confidential information, not to restrict employment. What can restrict employment is a non-compete agreement or clause, which is different from an NDA. However, an NDA may prevent you from taking trade secrets to a competitor.
In most cases, the answer is no. Violating an NDA is generally a civil, not criminal matter. However, if violating the NDA involved criminal activity like theft of trade secrets, then yes, you could end up in criminal court.
Yes, but obviously you can’t reveal the information that was the reason for the NDA in the first place.
No one can force you to sign an NDA. However, the other party also has the right to walk away if you don’t sign.