Use a confidentiality agreement if you need a party to keep specific information disclosed for a certain period of time or for 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
There are two types of confidentiality agreements:
- Mutual confidentiality agreement: used when both parties disclose and receive information that must remain confidential.
- Unilateral confidentiality agreement: 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 important 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. For example, the following information may appear in a business confidentiality agreement 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
Although confidentiality agreements are legally binding, they’re not all-encompassing. Learn what information you can and can’t protect with an NDA.
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 prthe 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 a period of time by including a non-solicitation clause.
- Term: Outline how long the confidentiality agreement will last — this is often how long the potential business relationship.
- 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.
Confidentiality Agreement Sample
Here’s what a standard confidentiality agreement looks like:
Frequently Asked Questions
How do I ensure my confidentiality agreement form is valid?
Although state laws differ, your confidentiality agreement form will be legally binding and enforceable if:
- It’s signed and dated by both the receiving and disclosing party
- The confidential information defined in the agreement is unavailable to the public
- The scope of the agreement is not overly broad
- An item listed as confidential, such as a product design, cannot be developed or replicated easily without access to the designs.
Just because your confidentiality agreement is valid doesn’t mean the other party will adhere to it. Understand what to do if someone breaks your NDA.
Can confidentiality agreements be indefinite?
Yes, confidentiality agreements can be indefinite. Even if the confidentiality agreement has a definite term, the obligations of the agreement can be stated to go on indefinitely.
However, most signatories to the agreement would prefer the document to expire at some point.
How long should a confidentiality agreement last?
A confidentiality agreement should last as long as you require the information to be confidential. Typical time frames are between one and five years, but they can be as long as you need them to be.
A confidentiality agreement should last an appropriate length of time so that the disclosing party’s interests are covered.
