Decision tree · Commercial
NDA Triage: Green, Yellow, Red
Most inbound NDAs are interchangeable and low-stakes. A few carry real teeth — an embedded non-solicit, a residuals clause, a missing carve-out that puts you in breach the day a subpoena arrives. The goal of triage is to route the boring ones to a signature and reserve counsel’s time for the handful that actually matter.
The three lanes
Triage works only if the lanes are defined in advance and the routine lane can move without a lawyer. The point is not that GREEN NDAs are risk-free — it is that their risk is known, bounded, and not worth counsel’s hourly rate. A workable delegation lets a trained business owner or contract manager clear GREEN under standing authority, escalates YELLOW for a short read, and sends RED for full review.
- GREEN — sign under delegation. Standard, mutual, time-limited, with the usual carve-outs intact. No surprises. Cleared by the delegated owner against a fixed checklist.
- YELLOW — quick counsel look. One or two terms are off-market or unusual, but nothing facially dangerous. A short read either clears it or kicks it to RED.
- RED — full legal review. A term creates real exposure, the agreement does double duty as something other than an NDA, or the deal behind it is significant enough that the paper deserves scrutiny on its own.
The triage tree
Run an inbound NDA through these gates in order. The first one that trips sets the lane — a single RED factor controls regardless of how clean the rest looks.
Stop and route to counsel. An NDA is not the place to take on hiring or competitive restrictions, and signing one to close a routine information exchange can bind the company in ways no one priced. Strip it or negotiate it as its own term — never let it ride through on delegated authority. Enforceability of these covenants varies by state and is actively in flux; that is a reason to involve counsel, not to wave them through.
Continue.
Route to counsel before signing. Without it, the agreement can put the company in breach the moment a subpoena, regulator, or court compels production — turning a routine legal obligation into a contract claim. This is usually a quick fix, not a deal-breaker, but it is not a clause a non-lawyer should waive.
Continue.
Yellow. The recipient’s obligations may sweep in information it already had or develops on its own. Usually a quick fix; flag for a short counsel look rather than signing as-is.
Continue.
Yellow, leaning Red if you’re the disclosing party. A residuals clause can quietly gut the protection you think you’re getting — it lets the recipient freely use whatever its people remember. Tolerable in a mutual exchange of low-sensitivity information; a real problem when you are the one handing over the crown jewels.
Continue.
Green. Sign under delegation. This is the lane most inbound NDAs belong in, and the whole reason to triage is to get them there without ceremony.
Yellow. A one-way NDA in which you are the receiving party deserves a closer read — the obligations run in one direction, so the off-market terms are the ones that bind you. Same for an overbroad definition, a perpetual term, or a missing purpose limitation. One short look usually resolves it.
The factors that move the lane
The tree above is the fast path. When a term is borderline, this is what each factor is doing and which direction it pushes.
| Factor | What to look for | Lane signal |
|---|---|---|
| Mutual vs. one-way | Do both sides owe confidentiality, or only you? A one-way NDA favoring the discloser warrants more scrutiny when you are the recipient. | Mutual: green · One-way against you: yellow |
| Definition of “confidential information” | Reasonably scoped, or does it sweep in “all information disclosed” with no marking or limit? Everything-is-confidential is unworkable. | Scoped: green · Overbroad: yellow |
| Term & survival | A finite term with a defined survival period. Perpetual confidentiality obligations are a flag — most defensible when limited to true trade secrets. | Finite: green · Perpetual: yellow |
| Purpose / use limitation | Use confined to the stated purpose. A missing or vague purpose lets the information travel anywhere. | Defined: green · Absent: yellow |
| Standard carve-outs | Public, already known, independently developed, rightfully received from a third party. | Present: green · Missing: yellow |
| Compelled-disclosure carve-out | An exception for production required by law, subpoena, or court order, ideally with notice to the discloser. | Missing: red |
| Residuals clause | A right to use what people “remember.” Erodes protection for the disclosing party. | Present: yellow / red if you disclose |
| Return / destruction | An obligation to return or destroy on request or at termination, with a reasonable archival exception. | Present: green · Absent: yellow |
| No license / no obligation to proceed | Confirms the NDA grants no IP rights and commits neither side to a deal. | Present: green · Absent: yellow |
| Embedded restrictive covenant | Any non-solicit, non-compete, or no-hire riding inside the NDA. | Present: red |
| Remedies & liability | A stipulated injunction or injunctive relief without bond, liquidated damages, fee-shifting, indemnification, or uncapped liability. None of these belong in a routine NDA, and any of them can outrun what the information exchange is worth. | Present: yellow |
| Governing law / forum | An off-market choice of law or forum — an inconvenient or unexpected jurisdiction, rather than a neutral or home forum. | Off-market: yellow |
Make the delegation real
Triage only saves time if the GREEN lane actually clears without a lawyer. That means a written delegation: who can sign, against what checklist, up to what sensitivity of information, with a bright line back to counsel. Many in-house teams find it useful to keep a short list of pre-approved fallback edits — a standard compelled-disclosure carve-out, a fixed term in place of perpetual — so the business owner can fix the common YELLOW issues without a round-trip. Keep a log of what cleared under delegation; it both protects the delegate and tells you whether the lanes are drawn in the right place.
An embedded non-solicit or non-compete — an NDA is not the instrument for those, and signing one to swap information can bind the company competitively in ways no one priced. And a missing carve-out for legally compelled disclosure, which can put you in breach the moment a subpoena arrives. Everything else is a matter of degree; these two are not.