The Two Types of NDA
Every non-disclosure agreement falls into one of two categories: mutual or one-way. The difference determines whose information is protected and who bears the legal obligation of confidentiality.
Getting this right matters because the two types create fundamentally different obligations — and using the wrong one in the wrong situation either leaves you exposed or creates obligations you did not intend to take on.
One-Way (Unilateral) NDA
In a one-way NDA, one party (the disclosing party) shares confidential information with another party (the receiving party), and only the receiving party is bound by the confidentiality obligation.
The disclosing party has no confidentiality obligations under the agreement — because they are not receiving any confidential information.
When to use a one-way NDA:
- You are sharing your business idea, product concept, or proprietary process with a potential contractor, manufacturer, or service provider who is not sharing anything confidential back
- You are hiring a freelancer and giving them access to your customer data, source code, or internal systems
- You are pitching a product or service to a potential distributor or licensee
- A potential employee is going through a hiring process that exposes them to confidential business information
Example language:
"Party A (Disclosing Party) may disclose certain confidential information to Party B (Receiving Party). Party B agrees to hold all confidential information in strict confidence and not disclose it to any third party."
Mutual (Bilateral) NDA
In a mutual NDA, both parties share confidential information with each other, and both parties are bound by the same confidentiality obligations. Either party can be both a disclosing party and a receiving party simultaneously.
When to use a mutual NDA:
- Two companies are evaluating a potential partnership, joint venture, or merger and need to exchange business information
- Two founders are exploring a business combination and both need to share financial and operational details
- A client and an agency are entering a long-term retainer where both will share proprietary strategies and processes
- Two developers are considering a technical collaboration and both have proprietary code or processes to protect
Example language:
"Each party (each as Disclosing Party) may disclose certain confidential information to the other party (each as Receiving Party). Each party agrees to hold all confidential information received from the other party in strict confidence."
Common Mistakes
Using mutual when one-way would suffice
If only one party is sharing sensitive information, a mutual NDA creates unnecessary obligations on the disclosing party. If the freelancer you are hiring has nothing confidential to protect, a mutual NDA obligates you to keep their information confidential too — even if they have nothing to disclose.
This is usually harmless but adds unnecessary complexity. Use one-way when the information flow is clearly one-directional.
Using one-way when mutual is appropriate
If you are entering a genuine exchange of confidential information and only one party is bound by the NDA, the other party is unprotected. In a partnership discussion where both parties share financial projections, a one-way NDA protects only one set of projections.
What Stays the Same
Regardless of the type of NDA, these elements are the same:
- Definition of confidential information (and exclusions: publicly available information, independently developed information, information received from other sources)
- Permitted uses of the confidential information
- Duration of the obligation (typically 2–5 years; perpetual for trade secrets)
- Obligations upon termination (return or destroy)
- Remedies for breach (injunctive relief, damages)
TermsDock's NDA Generator creates both one-way and mutual NDAs. Select the type that fits your situation, enter the parties and purpose, and receive a complete agreement in seconds.