A confidentiality agreement is a legally binding contract used 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 for a specified period.
A confidentiality agreement is also referred to as a:
- Non-Disclosure Agreement (NDA)
- Confidential Disclosure Agreement (CDA)
- Proprietary Information Agreement (PIA)
- Secrecy Agreement
Confidentiality Agreement Information
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 the disclosure of confidential information, you should use a confidentiality agreement. For example, if you’re engaging with:
- Employees: New hires should sign an employee confidentiality agreement that lasts for the duration of their employment, or a specified time 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, 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 must I include in my 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 protected by the agreement.
- 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.
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.
Free Confidentiality Agreement Template
If you’re wondering what a typical confidentiality agreement and its clauses looks like, we provide an example below.
This Confidentiality Agreement (this “Agreement”) is entered into as of __________ (the “Effective Date”) by and between:
__________, a __________ (“__________”), of __________, __________, __________ __________
__________, as an Individual (“__________”), of __________, __________, __________ __________
__________ and __________ have indicated an interest in exploring a potential business relationship (the “Transaction”). In connection with its respective evaluation of the Transaction, each party, their respective affiliates and their respective directors, officers, employees, agents or advisors (collectively, “Representatives”) may provide or grant access to certain confidential and proprietary information. The party disclosing its Confidential Information to the other party is hereafter referred to as “__________”. The party receiving the Confidential Information provided by __________ is hereafter referred to as “_________”. In consideration for being furnished Confidential Information, _________ and _________ agree as follows:
- Confidential Information
The term “Confidential Information” as used in this Agreement shall mean any data or information that is competitively sensitive material and not generally known to the public, including, but not limited to, information relating to any of the following: _____________________________________, which__________ considers confidential.
- Exclusions from Confidential Information
The obligation of confidentiality with respect to Confidential Information will not apply to any information if the information is disclosed by__________ with the prior written permission and approval by __________ OR:
- If the information is or was received by __________ from a third party source which, to the best knowledge of__________ or their Representatives, is or was not under a confidentiality obligation to __________ with regard to such information;
- If the information is or becomes publicly known and available other than as a result of prior unauthorized disclosure by__________ or any of their Representatives;
- If the information is independently developed by__________ prior to disclosure by __________ and without the use and benefit of any of the Confidential Information; or
- If __________ or any of their Representatives is legally compelled by applicable law, by any court, governmental agency or regulatory authority or by subpoena or discovery request in pending litigation but only if, to the extent lawful, __________ or their Representatives give prompt written notice of that fact to __________ prior to disclosure so that __________ may request a protective order or other remedy to prevent or limit such disclosure and in the absence of such protective order or other remedy, __________ or their Representatives may disclose only such portion of the Confidential Information which it is legally obligated to disclose.
- Obligation to Maintain Confidentiality
With respect to Confidential Information:
- __________ and their Representatives agree to retain the Confidential Information of __________ in strict confidence, to protect the security, integrity and confidentiality of such information and to not permit unauthorized access to or unauthorized use, disclosure, publication or dissemination of Confidential Information except in conformity with this Agreement;
- __________ and their Representatives shall adopt and/or maintain security processes and procedures to safeguard the confidentiality of all Confidential Information received by __________ using a reasonable degree of care, but not less than that degree of care used in safeguarding their own similar information or material;
- If there is an unauthorized disclosure or loss of any of the Confidential Information by __________ or any of their Representatives, __________ will promptly, at their own expense, notify __________ in writing and take all actions as may be necessary or reasonably requested by __________ to minimize any damage to __________ or a third party as a result of the disclosure or loss; and
- Upon the termination of this Agreement, __________ will ensure that all documents, memoranda, notes and other writings or electronic records prepared by them that include or reflect any Confidential Information are returned or destroyed as directed by __________.
- Non-Disclosure of Transaction
Without the prior written consent from __________, neither __________ nor their Representatives shall disclose to any other person, except to the extent, the provisions of Paragraph 2 apply: (a) the fact that Confidential Information has been made available to it or that it has inspected any portion of the Confidential Information; (b) the fact that __________ and __________ are having discussions or negotiation concerning the Transaction; or (c) any of the terms, conditions or other facts with respect to the Transaction.
__________ agrees that at no time from the date of this Agreement until __________will __________ engage in any business activity which is competitive with _________, nor work for any company which competes with __________.
From the date of this Agreement until __________, __________ agrees not to solicit any employee or independent contractor of _________ on behalf of any other business enterprise, nor shall ________ induce any employee or independent contractor associated with _________ to terminate or breach an employment, contractual or other relationship with _________.
__________ will take reasonable steps to ensure that their Representatives adhere to the terms of this Agreement. __________ will be responsible for any breach of this Agreement by any of their Representatives.
There is no representation or warranty, express or implied, made by __________ as to the accuracy or completeness of any of its Confidential Information. Except for the matters set forth in this Agreement, neither party will be under any obligation with regard to the Transaction. Either party may, in its sole discretion: (a) reject any proposals made by the other party or its Representatives with respect to the Transaction; (b) terminate discussions and negotiations with the other party or its Representatives at any time and for any reason or for no reason; and (c) change the procedures relating to the consideration of the Transaction at any time without prior notice to the other party.
Each party agrees that use or disclosure of any Confidential Information in a manner inconsistent with this Agreement will give rise to irreparable injury for which: (a) money damages may not be a sufficient remedy for any breach of this Agreement by such party; (b) the other party may be entitled to specific performance and injunction and other equitable relief with respect to any such breach; (c) such remedies will not be the exclusive remedies for any such breach, but will be in addition to all other remedies available at law or in equity; and (d) in the event of litigation relating to this Agreement, if a court of competent jurisdiction determines in a final non-appealable order that one party, or any of its Representatives, has breached this Agreement, such party will be liable for reasonable legal fees and expenses incurred by the other party in connection with such litigation, including, but not limited to, any appeals.
All notices given under this Agreement must be in writing. A notice is effective upon receipt and shall be sent via one of the following methods: delivery in person, overnight courier service, certified or registered mail, postage prepaid, return receipt requested, addressed to the party to be notified at the below address or by facsimile at the below facsimile number or in the case of either party, to such other party, address or facsimile number as such party may designate upon reasonable notice to the other party.
__________, __________ __________
Phone number: __________
Fax number: __________
__________, __________ __________
Phone number: __________
Fax number: __________
This Agreement will terminate on the earlier of: (a) the written agreement of the parties to terminate this Agreement; (b) the consummation of the Transaction; or (c) __________ __________ from the date hereof.
This Agreement may be amended or modified only by a written agreement signed by both of the parties.
- General Provisions
The obligation not to disclose Confidential Information shall survive the termination of this Agreement, and at no time will __________ or any of their Representatives be permitted to disclose Confidential Information, except to the extent that such Confidential Information is excluded from the obligations of confidentiality under this Agreement pursuant to Paragraph 2 above.
This Agreement will be governed by and construed in accordance with the laws of the State of __________, without regard to the principles of conflict of laws. Each party consents to the exclusive jurisdiction of the courts located in the State of __________ for any legal action, suit or proceeding arising out of or in connection with this Agreement. Each party further waives any objection to the laying of venue for any such suit, action or proceeding in such courts.
This Agreement will inure to the benefit of and be binding on the respective successors and permitted assigns of the parties. Neither party may assign its rights or delegate its duties under this Agreement without the other party’s prior written consent. In the event that any provision of this Agreement is held to be invalid, illegal or unenforceable in whole or in part, the remaining provisions shall not be affected and shall continue to be valid, legal and enforceable as though the invalid, illegal or unenforceable parts had not been included in this Agreement. Neither party will be charged with any waiver of any provision of this Agreement, unless such waiver is evidenced by a writing signed by the party and any such waiver will be limited to the terms of such writing.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.