Which NDA Type is Best for Business?

Which Non-Disclosure Agreement is Right for Your Business?

You’re on board with using an NDA to protect your business, but don’t know which type of NDA to start with?

Are all business NDAs the same? How do you pick one?

… and when would you use each one?

This article is designed for business owners looking to get a head start on incorporating NDAs into their business without the boring legal jargon.

NDAs are both the easiest business agreement and the most commonly used. So this will be a piece of cake for you!

Step 1 is believing you CAN understand and use NDAs. You can. No special degree, knowledge or skill is needed. If this article seems overly simple to you- guess, what? That’s because NDAs ARE very simple.

So let’s get going!

We’re going to break types of NDAs into two parts: 1: one-way vs two-way NDAs; and 2. then we’ll go into which new to use when based on your business needs.

Yes, if you know one-way from two-ways you’re already half way there- see, I told ya NDAs are easy!

 Need a complete guide for Business NDAs? Check it out here. 

Unilateral vs. Mutual NDA: Choosing the Right Confidentiality Agreement for Your Business

Every NDA is either unilateral or mutual. See- Easy! 

Unilateral NDAs in Business

Unilateral NDAs are one-sided, or one-way NDAs. Hence the name unilateral NDA. Uni means one.

Unilateral NDAs are called this because only one party’s information is protected.

While every contract agreement has two or more entities agreeing to enter into it, what is promised is not always the exact same between both sides. 

The same goes for NDAs.

Unilateral NDAs only protect one of those party’s information. The other side does not get any protection for their confidential information. The NDA is one-way.

The most common use of unilateral NDAs in business is in the employee-employer context.

The company’s, or employer’s, information is what is being protected and the employee is promising to protect it.

The company does not offer the same confidentiality provisions to the employee.

Need an NDA + Know-How that fosters trust and innovation for your team? Check out Boss From The Beach

The business dynamic works between employers and employees as a one-way flow of the confidential information. 

Employers have the business information they want protected and employees are the ones promising not to share it, disclose it, or misuse it.

These are one-way relationships so a one-way NDA (aka unilateral NDA) is ideal.

Mutual NDAs in Business

If unilateral NDAs are one-way, then mutual NDAs are two-way NDAs!

In a mutual NDA, both parties get protection for their confidential information.

So why are they called mutual

NDAs and not bilateral NDAs?

Mutual NDAs are not just both sides getting protection for their information, both sides get exactly the same standards and protections at the same time.

NDAs only look at the exchange and protection of information. They are not about customer terms, payments, or anything else that may come up in a business relationship.

All those extra things will be on that customer or supplier agreement.

NDAs are about one thing and one thing only: Not Disclosing Information.

So either one party has protection, or both parties have it. Nothing else is at issue.

So, in a two-way NDA, both parties have protection and they would both have it equally.

When things are equal on an agreement we call that “mutual”. Everything is mutual.

Mutual agreement, mutual standards, mutual protection.

So we just call them mutual NDAs.

The majority of business NDAs used outside the employee-employer context are mutual NDAs because everyone, like customer and supplier, are equally important in each dynamic.

Is a Mutual NDA what you're after? Check out  NDA Today Now. The program that gives you everything you need to go from Mutual NDA draft to done in minutes.

Both parties could share information and both parties would want it protected. Mutual NDA is the way to go.

When to use Unilateral NDA or Mutual NDA In Your Business?

If the difference between NDA types is that one is one-way and the other is mutual, then the real question for which one to use is is your information dynamic a one-way flow or a two-way flow?

One way information flow would use a unilateral NDA. Anything else would want a mutual NDA in place.

Note: This is one of the biggest errors I see in business owners’ use of NDAs: It is not just what happens on day one of the information exchange you want to look at. The NDA is about the entire term of the NDA relationship.

There’s almost no such thing as a one-sided business partnership- even if it starts that way.

For example, let’s say you’re perhaps at the trial phase of getting a new customer. The potential customer needs to share some information with you to see if you make sense for them as a supplier so they send over a unilateral NDA.

This feels one-way. The customer is sharing information with you. There’s nothing you plan on sharing right now except publicly available information.

Unilateral makes sense- or does it?

Let’s look at the term of the relationship.

If that customer signs up, you may start having behind-the-scenes access for them, tell them what features you plan on rolling out next quarter, or explore new business opportunities with them as your business grows over the next few years.

And guess what- over that term, you are now the one sharing confidential information. If you signed a unilateral NDA only protecting the customer’s information, none of your information is protected this entire time!

This is why mutual NDAs are almost always the ideal NDA for business for any reason other than employee-employer dynamics.

If a business relationship succeeds, it will inevitably become a two-way exchange. If it doesn’t succeed, it’s a good thing you protected your information with a mutual NDA!

Learn more about why NDAs are important for business here. 

I worked for a Fortune 500 whose policy it was to only sign mutual NDAs. They rejected requests to review unilateral NDAs.

The company understood that every business-to-business (B2B) relationship was likely to have a two-way element at some point. So they set it as a base that everyone got protection no matter how the business relationship may start or change over time.

For clarity, mutual NDAs do not obligate a party to share information, and they stay legally enforceable even if only one party shares information. There is no requirement to actually share anything.

So if it’s even possible that both parties may share information over the term of the relationship, go with a mutual NDA.

I recommend Mutual NDAs for every business dynamic other than employee-employer dynamics. All of them!

Whether you’re using the NDA for

•  Customers
•  Suppliers or Vendors
•  Partnerships, Alliances, or Joint Ventures
•  Collaborations for anything from content creation to partnering with a competitor
•  Potential Investors, Mergers, or Acquisitions
•  Any support teams that are not employees like freelancers, CPAs, Lawyers, etc.

If you're looking for a Mutual NDA for Business-to-business dynamics, check out  NDA Today Now. The program that gives you everything you need to go from draft to done in minutes.

When do you want to Use a Unilateral NDA?

Employee-employer dynamics are the ideal unilateral NDA situation.

Employer-employee dynamics also have added terms and considerations that don’t exist in B2B relationships, so you want not just a unilateral NDA, you want a unilateral NDA for employee-employer relationships.

In the market for an employee-employer NDA? Check out my Boss from the Beach Program that walks you through protecting your information at every phase of employment from hiring to post-employment breaches.

But what about non-employee dynamics? Are there any times a business may want a unilateral NDA?

In my 15 years of doing NDAs for businesses, I cannot think of a situation where a unilateral NDA was ideal for anything outside the employee situation.

However, I have seen unilateral NDAs used to get business closed and get the other party to a mutual NDA.

Example:

Let’s take the same potential customer use case we used above.

Maybe the potential customer is insistent and refusing to sign a mutual NDA because they feel it’s too risky to make promises to a vendor they don’t know yet.

You can’t argue back that you’re exchanging confidential information too because you aren’t yet.

While you want to highlight the importance of a successful and trustworthy relationship and how a mutual NDA is key to that, they may decide to hold their ground.

Rather than lose the sale altogether, you sign their unilateral NDA, BUT ONLY until you get them to sign mutual terms.

Risks of Unilateral NDAs

Remember your information is not protected if you sign a unilateral NDA with your customer or anyone. Do not share your information without an NDA protecting you too.

When your information is involved you get to be insistent on having a mutual NDA in place, but until then, you may need to take the added step of entering a unilateral NDA to get you there.

Potential Investors are also known for refusing mutual NDAs.

This is very dangerous because you have to share confidential information to get them on board as an investor.

If they do not sign an NDA, they can steal your ideas and do it their way, better, faster, and with more money behind it if they want to. No matter how legit, nice, or trustworthy they may seem.

They, like all businesses, are out for great revenue opportunities and will prioritize their needs.

NDAs with potential investors can almost be seen as a test to see if you do things the right way or give in easily.

Want to learn how NDAs can increase business revenue? Learn here.  

Be cautious with any company that refuses to sign an NDA to protect your information when you have to share information to get them on board.

This is why unilateral NDAs are often used in the employee-employer context for businesses only and mutual NDAs are used elsewhere.

Mutual NDAs are commonly used for any B2B (business to business) dynamic like use with customers, suppliers, vendors, investors, freelancers, and so on.

Next Steps for Your NDA

NDAs for businesses can be very easy if you allow them to and selecting the right one for your business is as simple as deciding a unilateral or mutual NDA. From there, you’ll choose one based on the business dynamic- eg for Employee-employer relationships, or for a B2B content.

Remember, a well-crafted NDA isn't just a legal document; it's a strategic tool for growth and success.

Looking for more information on NDAs? Whether your ready for an NDA for your employees and freelancers, an NDA for your business partners, customers and vendors, or looking for some great NDA videos I'm here to help. 

With Love and Awesomeness,

CEOLegalCoach