Confidentiality Agreement

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What is it?

A Confidentiality Agreement, also known as a Non-disclosure Agreement (NDA), is a document designed to keep confidential business information safe. This document can give you the confidence to enter into commercial relationships while at the same time protecting your sensitive data. It is a contract between at least two parties in which the parties agree not to disclose information covered by the agreement.

It provides any party disclosing information the ability to take legal action if the other party discloses the information to a third party, which could be either an individual outside of the business or another business entity.

In effect, it allows you to disclose confidential information to someone, for instance during a commercial negotiation or a recruitment process, while providing you with some peace of mind knowing that this information cannot be repeated, used, or shared with a third party.

Why do you need it?

While business information must typically be kept confidential, there are a number of occasions when you might need a Confidentiality Agreement.

Running a business involves working with other businesses and individuals where the exchange of sensitive business information is necessary, such as information on pricing, product specifications, manufacturing process, market share, or trade secrets.

Another common area when you must protect your sensitive data is when employing consultants or freelancers. Consultants will need information to do the work you require from them, but you don't want them disclosing the information to a competitor.

A well-drafted Confidentiality Agreement will help facilitate entry into business relationships while protecting your sensitive data and trade secrets and will ensure that the information provided is only used for a specific purpose and nothing else. It will also create clear and binding legal obligations to return or destroy the confidential information covered by the agreement when the specific purpose comes to an end.

Key clauses to watch for:

When drafting a Confidentiality Agreement, it is important to focus on a number of key clauses, in particular:

  • Clear definition of the information to be kept confidential;
  • Why you are exchanging information and for what purpose the information can be used;
  • How long the agreement will be in place; and
  • What happens after the information is not needed any more, for example at the end of the negotiation or specific purpose.

Confidentiality Agreement Document