What is a nondisclosure agreement (NDA) designed to do?

A nondisclosure agreement (NDA) is specifically designed to prevent the sharing of confidential information between parties. This legal contract creates a binding obligation for the receiving party to keep certain information private and not to disclose it to third parties without authorization. NDAs are commonly used in various situations, such as business negotiations, employment relationships, and partnerships, to safeguard sensitive data like business plans, client lists, proprietary processes, or other trade secrets.

While the other options mention important concepts in the realm of contracts, they are not the primary purpose of an NDA. Protecting physical assets relates more to property laws, facilitating the transfer of trade secrets involves different legal instruments such as confidentiality agreements or assignments, and specifying limited liability concerns the extent to which a party can be held liable in a contract, which are not the main focus of an NDA. Thus, the core function of an NDA is to ensure that the parties involved maintain the confidentiality of shared sensitive information, making the role of preventing the sharing of such information the correct answer.