• February 2019
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Is There a Practical Guide for What One Should Look for When Signing Someone Else’s NDA?

This is a pretty prevalent problem in the startup world especially when a startup is dealing with a much larger, more established company. The larger company will want you to sign their NDA or they will not do business with you and obviously they have more bargaining power at this point because that is just the nature of things.

So, what can you do? Well, you really do need to understand anything that you are signing and committing your company to. I don’t think simply skimming and signing will be your best strategy going forward. You should read the NDA or at least have one of your employees read the NDA so that you have a basic understanding of the provisions that you will be subject to.

A practical guide – you should look for things that stand out as unfair. Again, you really can’t do this without understanding what is contained in the NDA and you can’t understand what is contained in the NDA by simply skimming and signing it. You need to read it.

An example of something that would be unfair in an NDA would be, as mentioned by Justin Liu, a lack of mutuality, or basically an NDA that is too one-sided. If an NDA is asking you to do significantly more than you are asking the other company to do, there would be a lack of mutuality. Generally, you don’t want to subject yourself to any one-sided provisions.

Another example of something that would be unfair could be a harsh punishment in the event of a breach. To understand this you first need to understand what would actually be a breach under the agreement and also what would happen in the event of a breach. Then, basically evaluate if the punishment fits the crime. If a small breach could subject you to disproportionate liability, that is unfair.

In sum, you really should be reading the NDAs that you sign and commit your company to.

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