Definition of NDA, Types, and Its Key Functions

An NDA is a contract designed to protect the confidentiality of business information. Learn the definition, elements, types, main functions, and how to sign it securely.

When dealing in the professional and business world, you’ve probably heard of a confidentiality agreement or NDA. Yet many people still wonder: what does an NDA look like? Why do certain transactions and agreements require one?

At its core, an NDA is a binding legal document. In this article, we’ll explore what an NDA is, its types, the essential elements inside it, and how to sign one properly and securely.

What Is an NDA and What Is Its Function?

NDA stands for Non-Disclosure Agreement, also known as a confidentiality agreement. Simply put, an NDA is a contract binding two or more parties to not disclose confidential information obtained during business collaboration or professional interaction.

An NDA outlines the obligations of the recipient to protect information provided by the disclosing party. It is commonly used by companies, startups, freelancers, and content creators who want to safeguard sensitive business information.

Main functions of an NDA include:

• Protecting trade secrets: covering client data, marketing strategies, product formulas, sales data, or app designs.

• Providing legal certainty: if information is leaked, an NDA ensures there is legal protection.

• Building trust: when both parties (e.g., investor and startup) sign an NDA, it establishes mutual trust and professionalism.

NDA Legal Basis in Indonesia

In Indonesia, NDAs are primarily governed by the Civil Code (KUHPerdata), particularly Article 1320 on valid contract requirements. Other relevant regulations include:

• Law No. 28 of 2014 on Copyrights – protecting confidential creative information.

• Law No. 13 of 2016 on Patents – protecting patent-related information.

• Law No. 30 of 2000 on Trade Secrets – the most specific regulation, often applied when NDAs protect business secrets.

Many confuse NDAs with MoUs (Memorandum of Understanding). The difference:

• MoU is a general cooperation agreement and not always about confidentiality.

• NDA specifically focuses on confidentiality and restricting disclosure.

So, is an NDA legally binding? Yes—NDAs are legally enforceable in Indonesia as long as they meet Civil Code contract requirements. For digital documents, validity also falls under the Electronic Information and Transactions Law (UU ITE).

3 Common Types of NDAs

The format of NDAs varies depending on business needs. Understanding the types helps ensure the document fits the collaboration.

1. Unilateral NDA (One-Way)

Only one party discloses confidential information, and the other is obligated to protect it.
Example: a company shares product data with a vendor that must not be disclosed.

2. Bilateral NDA (Two-Way)

Both parties exchange confidential information and must protect each other’s data.
Example: two companies exploring a joint venture share financial data.

3. Multilateral NDA (Multi-Party)

Involves three or more parties, often used in large collaborations such as consortiums or international tenders.

Key Elements of an NDA

For an NDA to be legally valid and effective, it must include:

1. Parties’ Identities: Full names, addresses, and contacts of disclosing and receiving parties.

2. Definition of Confidential Information: Specify what counts as confidential (e.g., financial data, business strategies, product designs).

3. Limitations of Use: Confidential information may only be used for agreed purposes.

4. Duration of Agreement: Validity period and how long confidentiality must be maintained after collaboration ends.

5. Breach Penalties: Legal consequences if either party violates the NDA.

6. Governing Law: Which jurisdiction applies in case of disputes.

Without these elements, an NDA may lose its enforceability and purpose.

Tips for Signing NDAs Securely

Since NDAs are binding legal documents, the signing process must also be valid. Traditionally, NDAs are signed with wet signatures. But for digital NDAs, not all electronic signatures are legally valid.

According to Law No. 11 of 2008 on Electronic Information and Transactions (UU ITE) and its amendment Law No. 19 of 2016, certified digital signatures must use Electronic Certificates issued only by licensed Electronic Certification Authorities (PSrE).

VIDA is one of the officially recognized PSrEs in Indonesia, authorized to issue certified digital signatures.

Key benefits of using VIDA for NDAs:

• Certified digital signatures – legally valid and recognized under Indonesian law, equivalent to wet signatures.

• Magic Scan – digitize NDA documents directly from your phone, keeping everything neat and ready.

• Integrated e-Stamp (e-Meterai) – attach official e-stamps for NDAs requiring higher-level legal authentication.

With VIDA’s certified digital signatures, NDAs are not only legally valid but also practical for remote or hybrid work arrangements.

An NDA (Non-Disclosure Agreement) is one of the most important tools to protect business confidentiality and build trust in professional partnerships. By understanding its definition, types, and key elements, you can safeguard your business interests and prevent data leaks.

Using VIDA digital signatures and Magic Scan, signing NDAs becomes more secure, efficient, and fully compliant with Indonesian law.