Use a confidentiality agreement if you need a party to keep specific information disclosed for a certain period or as long as the relationship with that party lasts, whether as a business or between individuals.
What Is a Confidentiality Agreement?
A confidentiality agreement is a legally binding contract to protect confidential or proprietary information shared between businesses or individuals.
The parties agree not to disclose the information outlined in the agreement for the duration of the relationship or a specified period.
Types of Confidentiality Agreements
- Mutual: used when both parties disclose and receive information that must remain confidential.
- Unilateral: used when one party discloses confidential information (disclosing party) while the other party receives and promises to keep the information confidential (receiving party).
When Should I Use a Confidentiality Agreement?
If you and another individual or business wish to pursue a relationship that requires disclosing confidential information, you should use a confidentiality agreement. For example, if you’re engaging with:
- Employees: New hires should sign an employee confidentiality agreement or a specified period after termination.
- Independent contractors: Prevent independent contractors from sharing sensitive information with competitors.
- Consulting firms: Ensure your internal information is safeguarded during and after an audit.
- Businesses: Protect your proprietary information when pursuing joint ventures, partnerships, mergers, and acquisitions.
- Interviewees: Protect the information shared with a candidate during the interview process with an interview confidentiality agreement.
If you’ve been asked to enter into a non-disclosure agreement, it’s essential to understand when you should (and shouldn’t) sign an NDA.
What Does a Confidentiality Agreement Protect?
A confidentiality agreement protects any information you’ve categorized as confidential in your form:
- Marketing strategies: long- and short-term plans for marketing a company’s products and services to customers
- Product plans: every stage of product development from ideation and beta testing to product launch
- Financial information: all documentation and procedures that make up a company’s finances, including forecasts, reports, taxes, expenditures, profits, losses, and more
- Source code: original code created by programmers employed or contracted by the company
- Intellectual property: copyrights, patents, and trade secrets developed or purchased by the company
What to Include in a Confidentiality Agreement?
A standard confidentiality agreement should include the following information:
- Receiving and Disclosing Party: If either party is a business, you’ll need to specify which type (LLC, corporation, etc.) and where it was formed, as well as include a representative’s name, title, and contact information.
- Confidential Information: Specify the types of confidential information the agreement protects
- Non-Compete Clause: Decide whether or not to include a non-compete clause, and specify when the non-compete period ends.
- Non-Solicitation Clause: Restrict the receiving party from hiring your employees for some time by including a non-solicitation clause.
- Term: Outline how long the agreement will last — this is often how long the potential business relationship is.
- Duration: Define how long the receiving party must maintain confidentiality after the agreement ends.
- Jurisdiction: Establish which state’s laws will govern the agreement.
- Effective Date: Decide when the agreement goes into effect.
