Should You Use NDAs With Clients or Contractors? Pros and Pitfalls

Whether you're a coach, course creator, or service provider, protecting your business’s intellectual property and sensitive information is critical. One legal tool often used for this purpose is the Non-Disclosure Agreement (NDA), but is it always necessary?

In this post, we’re breaking down the pros and pitfalls of using NDAs with clients or contractors, when they’re appropriate, and what legal risks you could run into if you misuse (or skip) them.

What Is an NDA?

A Non-Disclosure Agreement (NDA) is a legally binding contract that prevents the receiving party from sharing, using, or disclosing confidential information shared during the course of a relationship.

NDAs are commonly used in:

• Contractor agreements

• Client onboarding

• Collaborations or joint ventures

• Investor discussions

• Employment relationships

But just because you can use an NDA doesn’t always mean you should.

Why Use an NDA With Clients or Contractors?

Pros of Using NDAs:

1. Protects Confidential Information

If you’re sharing proprietary systems, pricing models, or internal documents, an NDA creates a legal obligation to keep that information private.

2. Sets Clear Boundaries

NDAs communicate to contractors and clients that you take confidentiality seriously, this sets the tone for a professional relationship from the start.

3. Adds a Layer of Legal Recourse

If a client or contractor discloses your sensitive data, a signed NDA gives you a stronger foundation to take legal action.

4. Useful for Contractors Handling IP

If your freelancer or contractor is helping with things like branding, copywriting, product development, or tech builds, they may gain access to your trade secrets. An NDA helps protect your IP before it's fully developed or publicly launched.

When NDAs Can Backfire or Be Overused

Pitfalls of Using NDAs:

1. They Can Deter Clients or Freelancers

Some professionals see NDAs—especially complex or one-sided ones, as red flags or signs of mistrust. They may hesitate to work with you or delay onboarding.

2. NDAs Don't Always Prevent Theft

An NDA is only as powerful as your willingness to enforce it. If someone violates it, you'll need to prove damages and potentially litigate, which can be expensive.

3. Overuse Can Dilute Their Purpose

Using NDAs as a blanket requirement for every interaction can come across as legally aggressive or unnecessary, especially in early-stage conversations or low-risk projects.

4. Template NDAs May Be Invalid

Generic NDAs downloaded online may not be enforceable in your jurisdiction, or may miss key protections you actually need.

When You Should Consider an NDA

Use an NDA when:

• You're disclosing trade secrets or proprietary frameworks

• You're hiring a contractor or freelancer who will access client lists, internal systems, or IP

• You're collaborating with another business or brand pre-launch

You're pitching a product or concept that isn't yet public

When You Might Not Need an NDA

Skip the NDA when:

• The information is publicly available or not sensitive

• You're in the early stage of a casual inquiry or quote

• The scope of work doesn’t involve access to your systems or clients

The trust-based relationship has legal protections built into another contract (e.g., confidentiality clauses within a service agreement)

NDA Alternatives or Complements

Sometimes, including a confidentiality clause in your Service Agreement, Contractor Agreement, or Terms of Use is sufficient. This avoids an extra document but still gives you legal protection.

Also consider:

• Non-Compete Clauses (if legally enforceable in your state)

• Work-for-Hire Agreements

• IP Ownership Clauses

Quick Tips for NDAs That Actually Hold Up

• Use clear definitions of what is “confidential”

• Be reasonable with duration (e.g., 1–3 years)

• Include consequences or remedies for breaches

• Specify jurisdiction in case of disputes

• Customize for your state laws and industry
  

Final Thoughts: Should You Use NDAs?

An NDA can be a powerful legal tool, but it’s not a one-size-fits-all solution. Used wisely, NDAs protect your assets and set the tone for professional, respectful collaboration. Used haphazardly, they can damage trust and be difficult to enforce.

If you're unsure whether you need an NDA or if your current one actually holds legal weight, it’s time to get tailored advice.

Call to Action:

Want to make sure your NDAs actually protect your business and your brand?
At MJ Morley Law, we help coaches, creatives, and consultants use legal contracts that are clear, enforceable, and client-friendly.

Contact us today to review your NDA or draft one customized for your business.