What is a non-disclosure agreement (NDA)?
Quick answer
A non-disclosure agreement, or NDA, is a contract in which one or both parties agree to keep certain information confidential and use it only for an agreed purpose. A one-way NDA protects one side's information. A mutual NDA protects both.
Last updated
Updated · By Robert Breen
Why it matters for a small business
Businesses share sensitive things all the time: pricing, client lists, product plans, financials. An NDA sets the ground rules before that happens. A typical one defines what counts as confidential, lists exclusions such as information that is already public, says how the information may be used, and sets how long the duty lasts and what happens to copies at the end.
NDAs matter for AI at work in a way people miss. If you paste a partner's confidential document into an AI tool, you may be sharing it with a vendor the NDA never allowed. Whether a particular tool counts as a breach depends on the agreement's wording and the tool's terms, so check your company's AI policy and ask whoever owns the contract. NDAs are legal documents: have an attorney review one before you sign, especially if it is not a standard form.
In a real lesson: Turn a Client Meeting into Action Items and a Follow-Up Email (Accounting Firms)
The Summarize a Client Meeting lesson never mentions an NDA, but its closing advice is about the same instinct. You summarize a review between Millbrook Accounting, a made-up firm, and its made-up client Cedar Lane Landscaping, covering September statements, a financed truck and missing W-9s.
The lesson ends with: "Client meetings are confidential: follow your firm's policy on AI tools, use a business account that doesn't train on your data, and leave out account numbers and tax IDs." An accounting firm's duty to keep client information private usually comes from professional rules and its engagement terms, not from an NDA. An NDA is what a firm might sign with an outside party, such as a software vendor or a contract bookkeeper, before sharing anything.
Either way, the practical step is the same one the lesson teaches. Before a transcript or document goes into an AI tool, ask what agreements cover it, and leave out details the task does not need.
Try this lesson free or read the step-by-step guide.
Common confusions
NDA vs attorney-client privilege
An NDA is a contract the parties choose to sign. Attorney-client privilege is a legal protection for certain communications between a lawyer and a client. One does not create the other.
NDA vs confidentiality clause
Many contracts, such as a master services agreement, include a confidentiality section. A standalone NDA is used when parties want those rules before any bigger deal exists, such as during early talks.
Tips
- Check whether it is mutual or one-way, and whether that matches who is really sharing.
- Look at how long the duty lasts and whether the agreement asks you to return or destroy copies at the end.
- Ask whether shared information may go into AI tools or other vendors' systems before you paste anything.
- Have an attorney review any NDA before signing. An AI summary is a reading aid, not legal advice.
Related terms
More Business terms
Where you use it: free lessons
- Turn a Client Meeting into Action Items and a Follow-Up Email (Accounting Firms) (ChatGPT, 9 min)
- Reply Faster to a Client Asking for a Case Update: ChatGPT for Small Law Firms (ChatGPT, 10 min)
- Turn a Client Kickoff Call into a Proposal Outline with ChatGPT (Agencies & Consultants) (ChatGPT, 10 min)
- Safe AI at Work: What Not to Paste, Training Settings and Checking Answers (ChatGPT, 7 min)
Prompt templates that use it
Frequently asked questions
- Can AI summarize an NDA for me?
- It can help you spot the main terms and questions to ask, if your company allows putting the document into that tool. It cannot tell you whether the terms are right for you. That is a job for an attorney.
- Do I need an NDA before every sales call?
- No. Most early conversations do not involve truly confidential information. NDAs come up when one side needs to share something sensitive, like detailed financials or a client list.