A confidentiality agreement, also known as a non-disclosure agreement (NDA), is a legal contract entered into by two or more parties that specifies how confidential information will be shared and protected. It is used to safeguard sensitive or proprietary information that should not be shared with third parties, such as trade secrets, customer lists, financial information, or other confidential business information.
The confidentiality agreement specifies what information is considered confidential, who has access to it, and how it may be used. It usually includes provisions for preventing unauthorized disclosure of the information, such as requiring the recipient to keep the information confidential, limiting the use of the information to a specific purpose, and specifying the circumstances under which the information may be shared with others.
Confidentiality agreements are frequently used in business transactions such as mergers and acquisitions, joint ventures, licensing agreements, and employment contracts. They are also used in R&D agreements, where one party may share confidential information with another in order to develop new products or technologies.
It is important to note that a confidentiality agreement is a legal contract, and as such, it should be carefully drafted and reviewed by legal professionals to ensure that all parties’ interests are adequately protected.
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7 Criteria for Confidentiality Agreement
A confidentiality agreement is a legally binding document that spells out the terms and conditions for keeping confidential information private. A confidentiality agreement typically includes the following criteria:
- Parties identification: The agreement should clearly identify the parties involved, including the disclosing and receiving parties.
- The agreement should clearly define what constitutes confidential information, which includes trade secrets, proprietary information, and other sensitive information.
- The purpose and duration of the confidentiality obligations, as well as any exceptions to the confidentiality obligations, should be specified in the agreement.
- Obligations of the receiving party: The agreement should outline the receiving party’s obligations, such as requirements for protecting and safeguarding confidential information, restrictions on the use of the information, and disclosure limitations.
- Exceptions to confidentiality obligations: Any exceptions to confidentiality obligations, such as disclosures required by law or court order, should be included in the agreement.
- Remedies for breach: The agreement should specify the remedies available in the event of a breach of the confidentiality obligations, such as injunctions, damages, and attorneys’ fees.
- The agreement should specify the governing law and jurisdiction for any disputes that may arise from the agreement.
Confidentiality Agreement Template
AGREEMENT ON CONFIDENTIALITY
This Confidentiality Agreement (“Agreement”) is made and entered into by [Name of Disclosing Party], a [State] corporation with its principal place of business at [Address] (“Disclosing Party”), and [Name of Receiving Party], a [State] corporation with its principal place of business at [Address] (“Receiving Party”) (“Receiving Party”). This Agreement goes into effect on [Date] (“Effective Date”).
WHEREAS, the Disclosing Party has disclosed or may disclose confidential and proprietary information to the Receiving Party (“Confidential Information”); and
Whereas, the Party receiving parties to protect the confidentiality of confidential information on and agrees not to use or disclose confidential information except as authorized by this agreement
1.1 “Confidential Information” means any and all confidential and/or proprietary information of the disclosing party, including, without limitation, technical, financial, business, customer, marketing, and other information, whether disclosed orally, in writing, or by other means.
1.2 “Recipient” means any individual or entity to whom the Receiving Party discloses confidential information pursuant to this agreement.
2. RECEIVING PARTY OBLIGATIONS.
2.1 Confidentiality Obligation. The Receiving Party agrees to keep the Confidential Information confidential and to protect it from unauthorized disclosure or use.
2.2 Confidential Information Use. Receiving Party agrees not to use the Confidential Information for any purpose other than evaluating or discussing a potential business relationship between the parties, or as otherwise authorized in writing by Disclosing Party.
NOW, THEREFORE, in consideration of the mutual promises, covenants, and conditions contained herein, the parties agree as follows:
2.3 Disclosure of Confidential Information. Receiving Party agrees that it will not disclose the Confidential Information to any third party, except to its employees, contractors, or agents who have a need to know the confidential information for the purpose of evaluating or engaging in discussions concerning a potential business relationship between the parties or as otherwise authorized in writing by Disclosing Party. Receiving Party agrees to inform its employees, contractors, and agents of the confidential nature of the Confidential Information and to require them to abide by the terms of this Agreement.
2.4 Confidential Information Protection. The Receiving Party agrees to take reasonable steps to protect the Confidential Information from unauthorized use, disclosure, or dissemination, and to use at least the same degree of care that it uses to protect similar confidential information.
2.5 Unauthorized Disclosure Notification. Receiving Party agrees to immediately notify Disclosing Party in writing of any unauthorized use, disclosure, or dissemination of the Confidential Information.
2.6 Confidential Information Return. Receiving Party agrees to promptly return all Confidential Information in its possession or control to Disclosing Party upon written request from Disclosing Party or upon the termination of this Agreement, whichever occurs first.
3.1 Legally Required Disclosure. If the receiving party is required to disclose any confidential information by law or legal process, it shall promptly notify the disclosing party in writing prior to such disclosure and shall cooperate with the disclosing party in seeking a protective order or another appropriate remedy.
3.2 Permission to Disclose. This Agreement does not preclude the Receiving Party from disclosing confidential information that is already known to it without restriction, obtained from a third party without restriction, independently developed by Receiving Party without the use of the confidential information or required to be disclosed by any government agency or regulatory authority.
TERM AND TERMINATION.
4.1 Term. This agreement shall remain in effect until terminated in writing by either party.
4.2 Survivability. The confidentiality and non-use obligations will survive the termination of this agreement.
The Duration of the Confidentiality Agreement
A confidentiality agreement’s duration is typically determined by the nature of the confidential information being shared as well as the needs of the parties involved. Confidentiality agreements can be effective for a set period of time, such as the duration of a project or employment, or they can be in effect indefinitely, such as for the protection of trade secrets.
It is critical to ensure that the confidentiality agreement’s duration is reasonable and necessary to protect confidential information. For example, if the confidential information is only relevant for a short period of time, such as during the negotiation of a specific transaction, a shorter confidentiality agreement may be appropriate.
The duration of the confidentiality agreement may be negotiated between the parties involved in some cases. It is critical to ensure that the duration of the agreement is clearly specified and that both parties fully understand and agree to the terms. It is always advisable to seek legal advice to ensure that the duration of the confidentiality agreement is appropriate for your specific situation.
A confidentiality agreement is a legal document between a disclosing party and a receiving party that establishes the terms and conditions under which the receiving party may use or disclose the disclosing party’s confidential information. The agreement defines confidential information, specifies the receiving party’s obligations to keep the information confidential, and outlines the exceptions to the confidentiality obligations.
The agreement also specifies the agreement’s terms and the circumstances under which it may be terminated. A confidentiality agreement’s purpose is to protect the disclosing party’s confidential information and ensure that the receiving party only uses the information for authorized purposes.
Frequently Asked Questions
What is a confidentiality agreement?
A confidentiality agreement is a legal contract between two parties, typically a disclosing party and a receiving party, that outlines the terms and conditions under which the receiving party may use or disclose confidential information of the disclosing party.
What is the purpose of a confidentiality agreement?
The purpose of a confidentiality agreement is to protect the confidential information of the disclosing party and to ensure that the receiving party uses the information only for authorized purposes.
What does a confidentiality agreement typically include?
A confidentiality agreement typically includes definitions of what constitutes confidential information, obligations of the receiving party to maintain the confidentiality of the information, exceptions to the confidentiality obligations, the term of the agreement, and the circumstances under which it may be terminated.
Who can be a party to a confidentiality agreement?
Any two parties that have a need to exchange confidential information can be parties to a confidentiality agreement. This can include businesses, individuals, or any other legal entities.
Are there any exceptions to the obligations of confidentiality in a confidentiality agreement?
Yes, there are typically exceptions to the obligations of confidentiality in a confidentiality agreement, such as when disclosure is required by law or legal process, or when the information is already known to the receiving party without restriction or has been independently developed by the receiving party without the use of the confidential information.