What Is an NDA? Key Review Points and Practical Guidance for English-Language NDAs
A non-disclosure agreement (NDA) is often signed at an early stage of a business relationship. Signing without fully understanding the terms, however, can create unexpected risks. The definition of confidential information, restrictions on permitted use, and the treatment of information after termination are particularly common sources of disputes.
English-language NDAs require even more careful review because subtle differences in wording can significantly change the scope of a party's obligations.
For information about employment agreements, see “A Complete Guide to Employment Agreements: Templates, Key Points, and When to Consult an Administrative Scrivener”:
For general contract guidance, see “Key Points for Drafting and Reviewing Contracts: Benefits and Typical Fees of Consulting an Administrative Scrivener”:
What Is an NDA?
An NDA is an agreement under which a party promises not to disclose information learned through a business relationship to third parties. NDAs are used in outsourcing arrangements, joint development projects, mergers and acquisitions, and many other situations.
Protected information may include technical data, customer information, sales know-how, and pricing information. The scope of protection varies according to the agreement.
It is therefore essential to define precisely what information the NDA protects.
Key Points to Review First
An NDA should be reviewed from a practical perspective: exactly what activities and information will be restricted?
The scope of confidential information, limitations on the purpose of use, and handling after termination should all be clearly defined. Even a seemingly simple agreement can impose very different obligations depending on how its provisions are interpreted.
Is the Definition of “Confidential Information” Appropriate?
The definition of confidential information is one of the most important provisions.
If it is too broad, even information ordinarily used in daily business may become subject to confidentiality restrictions and interfere with operations. If it is too narrow, information that should be protected may fall outside the agreement.
Also check whether oral disclosures are covered and how publicly known information will be treated.
Is the Permitted Purpose of Use Limited?
An NDA commonly restricts the purpose for which received information may be used. The agreement should clearly state a purpose such as “solely for evaluating the proposed transaction.”
If the permitted purpose is defined too broadly, the information may be used in ways the disclosing party did not intend.
Return or Destruction After Termination
The agreement should explain what happens after the relationship ends.
Check whether documents and data must be returned or destroyed and whether electronic files must be deleted. If these obligations are unclear, responsibility for managing the information may continue after termination.
Conditions for Disclosure to Other Persons
The permitted scope of information sharing frequently becomes a practical issue.
Confirm whether information may be shared with employees, subcontractors, professional advisers, or affiliated companies and what safeguards apply to those recipients. Unclear rules may lead to unintended dissemination.
Damages and Injunctive Relief
The consequences of a breach are also important.
The scope and any cap on damages, together with the availability of injunctive relief, can significantly affect the risk of a violation. English-language agreements may impose especially broad liability, so these provisions require careful review.
Expressions Requiring Attention in English-Language NDAs
In an English NDA, wording can substantially affect the scope of a party's rights and obligations. Terms such as “shall,” “may,” “reasonable efforts,” “unless otherwise agreed,” and “at its sole discretion” should be understood in their contractual context rather than translated literally.
“Shall” and Exceptions
Example:
Party A shall maintain confidentiality.
Party A may disclose information when appropriate.
“Shall” generally creates an obligation, but broadly drafted exceptions may weaken the protection. Review the agreement as a whole instead of relying on a single mandatory word.
“May”
Example:
Party A may terminate the agreement upon breach by Party B.
“May” generally indicates permission or discretion rather than an obligation. The practical business consequences of exercising that discretion should also be considered.
“Reasonable Efforts”
Example:
Use reasonable efforts to protect information.
The required standard may be unclear unless the agreement or applicable law provides more detail. Consider whether specific security measures should be stated.
“Unless Otherwise Agreed”
This phrase allows the parties to create exceptions through a separate agreement. Check who may agree, how the agreement must be documented, and whether appropriate limits are included.
“At Its Sole Discretion”
This wording grants one party broad decision-making authority. Review whether the other party has any right to object and whether the discretion is subject to reasonableness or other limitations.
Common NDA Disputes
Frequent problems include:
• Different interpretations of the scope of confidential information
• Disagreement about who may receive information within an organization
• Failure to delete data after termination
• Breach caused by misunderstanding an English-language agreement
Many of these issues can be prevented by organizing and clarifying the provisions before signing.
Benefits of Professional NDA Drafting and Review
Although an NDA may appear simple, its risk profile can change substantially depending on the wording.
Having an administrative scrivener or another qualified professional draft or review the agreement can help clarify the meaning and risks of each provision and reduce the possibility of accepting unfavorable terms.
Professional review is also useful when the other party presents an NDA and your company is unsure whether signing it as written would create a disadvantage.
NDA Translation and Review Support
English-language NDAs require a different review perspective from Japanese-language agreements because small wording differences may change the scope of liability and obligations.
We provide content review and translation support for NDAs and other contracts, including:
• Reviewing an NDA presented by a business partner
• Identifying risks in an English-language agreement
• Explaining provisions and suggesting general revisions
You are welcome to consult us even if your concern is simply, “I am not sure whether it is safe to sign this agreement.” Reviewing the document before signing can help prevent future disputes.
For guidance on choosing a translator and typical costs, see “Benefits and Key Considerations When Requesting an English Contract Translation”:
