Confidentiality Agreements

A confidentiality agreement, also known as a non-disclosure agreement, is a legal contract between at least two parties that is designed to protect confidential information provided by one party to one or more parties.

Confidential agreements are commonly signed when two parties, individuals or other entities are contemplating doing business together and disclosure of confidential information by at least one of the parties is required in order to evaluate the potential business relationship.

A confidentiality agreement can protect almost any type of information that is not generally known. Examples of this include:
• financial information;
• customer lists and identities;
• know-how;
• business plans, strategies and methods;
• new inventions while the filing of a patent is pending;
• technical information;
• trade secrets; and
• statistical information.

Under the terms of a confidentiality agreement, the recipient of the confidential information undertakes not to use the information except for the specified purpose (e.g., to evaluate a business proposal) and not to disclose it to third parties, subject to certain exceptions. These exceptions are typically where the information:
• is already in the public domain;
• is already known to the recipient and has been reduced to writing by the recipient prior to the date of the confidentiality agreement;
• has been received from a third party under circumstances which involve no breach of the confidentiality agreement; or
• has been independently developed by the recipient, again, in circumstances which involve no breach of the confidentiality agreement.

If one of the exceptions applies, then the recipient is free to use the confidential information as it chooses.

Confidentiality agreements often include a term that the recipient can disclose the information to certain parties such as their employees or professional advisers, subject to those parties agreeing to be bound by a confidentiality agreement on similar terms.

Confidentiality agreements can be mutual, where both parties will supply information they wish to keep confidential, or one-way, where only one party is providing information they wish the other party to keep secret.

The term of a confidentiality agreement can be extremely important and such agreements often include a provision that the information remains confidential for a period after the expiration or termination of the agreement.