A non-disclosure agreement (NDA) is a legal contract that protects sensitive information shared between parties. When two companies, like Company A and Company B, collaborate on a project, they may exchange trade secrets or proprietary data. An NDA ensures that both parties keep this information confidential and do not share it with outsiders. If either party violates the NDA, they could face legal consequences, such as financial penalties. This agreement helps build trust and encourages open communication, allowing businesses to innovate without the fear of their ideas being stolen or misused by competitors.