NDA (Non-Disclosure Agreement) Basics [2025 Edition] Essential Guide for Side Businesses and Freelancers
"What is an NDA? Is it safe to sign?"
When you work as a side business or freelancer, you may be asked to sign an NDA (Non-Disclosure Agreement).
While NDAs are important contracts for protecting confidential information, signing without fully understanding the contents can lead to problems later. This article explains everything from NDA basics to key precautions.
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What is an NDA (Non-Disclosure Agreement)?
An NDA is a contract that promises not to disclose confidential information learned during business to third parties. Companies sign these when outsourcing work to protect their confidential information.
Other Names for NDAs
- - Confidentiality Agreement
- - Secrecy Agreement
- - Confidential Disclosure Agreement (CDA)
- - Proprietary Information Agreement (PIA)
Examples of Information Protected by NDAs
Business Information
- - Business plans and strategies
- - Customer lists and partner information
- - Pricing and cost information
- - Unreleased products and services
Technical Information
- - Source code and algorithms
- - Design documents and specifications
- - Know-how and manufacturing methods
- - Pre-patent inventions
Types and Characteristics of NDAs
Unilateral NDA (One-Way)
A format where only one party bears confidentiality obligations. This is the most common type when side businesses or freelancers receive NDAs from clients.
Example: A side business worker who receives client confidential information bears the obligation not to leak that information externally.
Mutual NDA (Two-Way)
A format where both parties bear confidentiality obligations toward each other. Used in joint development or equal partnerships.
Example: When sharing each other's technical information in a joint project.
Important NDA Checkpoints
Before signing an NDA, always check the following points.
1. Definition of Confidential Information
Verify that what constitutes "confidential information" is clearly defined.
Cautions
- - Avoid vague definitions like "all information"
- - Prefer clauses that only cover items explicitly marked "confidential" in writing
- - Confirm how verbal disclosures are handled
2. Confidentiality Period
Confirm how long the obligations last.
Typical Periods:
- - 2-5 years after contract termination is common
- - "Perpetual" is excessively long and can be negotiated
- - Technical information typically has longer periods, business information shorter
3. Exceptions
Confirm that information excluded from confidentiality obligations is clearly stated.
Common Exceptions
- - Information already known before disclosure
- - Publicly available information
- - Information legitimately obtained from third parties
- - Independently developed information
4. Damages Clause
Confirm the scope of liability for violations.
Check Points
- - Is there a cap on compensation amount?
- - Are there limitations like "direct damages only"?
- - Does it only cover intentional or grossly negligent acts?
5. Return and Destruction of Information
Confirm how information is handled at contract termination.
Since complete deletion of digital data can be technically difficult, check for language like "to a reasonable extent."
NDA Considerations in the AI Era
When using AI tools, special attention beyond traditional NDAs is required.
AI Tool Input May Constitute "Disclosure"
Entering confidential information into AI tools like ChatGPT or Claude may violate NDAs. This is because many AI services may use input data for learning or service improvement.
Measure 1: Confirm AI Tool Usage in Advance
Explain to clients before contracting that "AI tools may be used as supplementary tools" and obtain permission.
Measure 2: Anonymize Confidential Information
When entering data into AI, replace specific company names, personal names, and numbers with pseudonyms and placeholder values.
Measure 3: Use Local AI
For particularly sensitive projects, consider using local AI that operates offline (such as LM Studio).
Measure 4: Use API Versions
The OpenAI API version has options where input data is not used for training. Enterprise plans are also worth considering.
NDA Trouble Cases and Solutions
Case 1: Careless Social Media Posts
Posted on social media about participating in a major company's project and was pointed out for NDA violation.
Solutions
- - Never post any project-related information on social media
- - Get prior permission for portfolio inclusion
- - Avoid expressions like "a certain company" or "a certain project"
Case 2: Input into AI Tools
Entered a client's proposal document into ChatGPT for summarization purposes. Later was questioned about information handling.
Solutions
- - Never enter confidential information into AI
- - Always anonymize if you must enter data
- - Get prior agreement on AI tool usage
Case 3: Accepting Similar Projects
Used know-how gained from Company A's project to accept a project from competitor Company B. Company A raised concerns.
Solutions
- - Check for non-compete clauses
- - Distinguish between general skills/knowledge and confidential information
- - Consult in advance if uncertain
Checklist Before Signing an NDA
- ☐ Is the definition of confidential information clear?
- ☐ Is the confidentiality period reasonable (not perpetual)?
- ☐ Are exceptions appropriately stated?
- ☐ Is there a cap on damages?
- ☐ Is the scope of non-compete clauses not excessive?
- ☐ Is the method of returning/destroying information realistic?
- ☐ Have you confirmed AI tool usage?
- ☐ Have you asked questions and negotiated unclear points?
Negotiation is Possible
If you have questions about NDA terms, negotiating is common. Asking "Could you clarify this clause?" is not rude. Rather, it's appropriate professional behavior.
Summary
An NDA is an important contract that protects both you and your clients.
By thoroughly understanding the contents and being aware of AI tool usage precautions, you can work with confidence.
Key Points to Remember
- 1. Always confirm confidential information definitions and periods
- 2. Entering confidential information into AI tools is generally prohibited
- 3. Don't hesitate to ask questions and negotiate
- 4. Be especially careful with social media posts
Frequently Asked Questions
What happens if I violate an NDA?
You may face compensation claims. In addition to actual damages, there can be significant impact on your reputation and future work. Intentional violations may also be subject to criminal penalties under unfair competition laws.
Can I include projects in my portfolio?
Often prohibited by NDAs. If you want to include them, get written permission from the client. You can also negotiate "portfolio listing permitted" conditions at contract time.
Is it okay to work without signing an NDA?
Legally possible, but if you're handling confidential information, it's recommended to sign an NDA for self-protection. Even without an NDA, confidentiality obligations may arise under principles of good faith.
What if I receive an NDA in English?
It's important to accurately understand the contents. If unsure, consult translation tools or experts. Be particularly careful if the governing law is in a foreign jurisdiction.
Learn Contract Basics
Deepen your understanding of contracts beyond NDAs