A confidentiality agreement also known as a non-disclosure agreement is a contract between two or multiple individuals within which an agreement is made that the information within will be kept secret by all the parties involved. Most times all the entities involved are required to hold on to the terms of secrecy within the agreement, while sometimes only the receiving body is expected to keep the secret.
The situation that usually requires such a document is when multiple parties choose to come together on certain projects where various delicate information like trade secrets or other sensitive information would be shared between the parties involved. In the world of business relationships, it would be impossible to operate your activities on certain levels without working with other people.
When this is the case, then trust becomes a matter of great importance, and we just can’t just go into these types of relationships blindly. In a world where information is power, this type of agreement becomes the glue that sticks working parties together in trust or maybe in fear.
While it is true that such an agreement can be made orally, it is usually not advisable to rely on this form of agreement as it would be difficult to prove that there was ever an agreement like this in the court of law, although such a case can only be built in certain courts within certain jurisdictions. The wise thing to do all the time would be to make such an agreement a document of writing that can be held up in the court of law.
This type of agreement can also apply to employees within a company that have access to very sensitive information about the company. It could be new business innovation ideas, projects the company may be working on or even partnerships the company does not want the public to know about.
Confidentiality agreements or non-disclosure agreements are unilateral, which is the kind of agreement where only one party is required to keep the secret. Usually, it is the receiving party that is at the receiving end of this particular type of agreement. When a business entity or person is about to reveal certain information to another party, but fears that such information can easily be made public by the receiving party, a unilateral confidentiality agreement is filed.
Another kind is the bilateral, this is used mostly when two companies or individuals are coming together for a joint venture and each party needs to maintain their vital information. Both parties involved in this type of agreement are required by law to maintain the secret coming from both ends.
Then there’s the multilateral type of confidentiality agreement, this has to do with parties of more than two, who are involved in some type of joint venture. All parties are required by law to maintain the secrets shared as they all intend to work together moving forward.
This gives businesses or individuals hope when it comes to sensitive information, because at some point in time one would have to incorporate others into the work they are doing. If not for anything, but for the fact that the interested parties have to increase productivity, impact and efficiency. To do this, sensitive information would be shared, and such have to be protected from leaking out to the public or to an unauthorized party.
Now with the confidentiality agreement, businesses and individuals can work together knowing that these types of information are protected by the law, through the non-disclosure agreement signed by the participating parties.
Table of Content
- WHEN TO USE A CONFIDENTIALITY AGREEMENT
- ELEMENTS OF A CONFIDENTIALITY AGREEMENT
- WHEN A CONFIDENTIALITY AGREEMENT CAN BE LEGALLY BROKEN
WHEN TO USE A CONFIDENTIALITY AGREEMENT
Before we start talking about when to use a confidentiality agreement, we must look at situations where this type of agreement may not be necessary. If the party in question makes known the information to the receiving party without signing this type of agreement, then the secret is already out there and there would be no need to sign this type of agreement again.
If the information is already public knowledge or the party in question has to make the information public due to certain legal constraints. Another time when this type of agreement is no longer necessary is if the receiving party gains the information on their own, through another source before such joint partnership is established.
In as much as there are conditions that do not warrant the use of a confidentiality agreement, there are however those situations where are confidentiality agreement is a must.
Like already pointed above, sometimes employees are made to sign these types of documents if their jobs requires them to have access to this vital information. If one is seeking employment in some type of valued position within a company, the person can be made to sign a confidentiality agreement even during the interview stage for the job.
The potential employer may require the candidate to sign this type of agreement before the interview even begins. This is to protect the third party from such secrets being leaked to the public or even to a competitor by the candidate.
During sale of businesses
When businesses decide to come together in some type of joint venture or another company has decided to buy up some type of business from another vendor. The buying party or parties coming together have to sign this type of agreement to keep whatever intimate secrets that may be uncovered during the merger or acquisition.
For example, if a company is buying another, they would need to look at the financial records of the company in detail, so it is safe to say that during such investigation, secret transactions and information will be unveiled. These secrets must be protected by the law through the non-disclosure agreement.
In the act of carrying out certain projects that may have been contracted to a particular company, the contracting company may discover certain information about the business they are working for. This information may be very sensitive and could ruin the third party should it become public, or even made known to competitors. So, before such contracts are assigned, the third party may require the contractors to sign this type of agreement.
When a company or individual is contacted to consult on certain matters that affect a business, they may be privy to information that may be considered secret. This is due to the fact that in order for the consultant to consult effectively he/she may need to have all the information needed to have a correct perspective of the situation the business may be facing. And sometimes this will involve something the company may not want to leave the confines of their office walls.
New Products or Ideas
Sometimes in order for companies to get new products off the ground, they may need to partner with certain organisations. This would mean that the idea would be shared openly with all parties involved, so in order for the sharing party to have their ideas protected, this type of contract would have to be signed.
TYPES OF INFORMATION NEEDING A NON-DISCLOSURE AGREEMENT
We’ve looked at various moments when this type of agreement is needed, let’s take a look at the very nature of information that will require this type of agreement.
When filing for Patent Rights
If you have invented some type of new technology or device that stands to change the way civilization works. Then during the process of filing for your patent rights, you would need to protect your product, device, invention or discovery with this type of agreement, between the parties involved in making the patent rights available to you and also between the people who worked on the idea with you.
These are some of the vital information about how you do business and they could be the very pillars on which your company stands.
You may own a restaurant or a fast food chain, maybe you have a recipe that people love. Such combination of edible elements is the reason why your dishes taste the way they do and should be protected by this type of agreement, especially if you intend expanding your brand.
You may have done some financial transactions that may require some type of confidential treatment. Such financial information may need to be secured by this type of agreement if there is a need to make them known to certain parties.
In my opinion these types of plans are some of the most vital information within a business. Your marketing strategy could be the thing that makes your business greater than you ever imagined, these plans can be protected by this type of agreement.
If you are into manufacturing then, you may need to protect the processes that brings you to the final product.
Have you created a new design for a popularly used device and need to work with others on deploying it? Then this agreement can help keep things discreet.
Communications in Business
Certain things communicated between parties during business may need to be kept protected by this agreement.
ELEMENTS OF A CONFIDENTIALITY AGREEMENT
SECRET INFORMATION DEFINED
This is where the discloser must get articulate about what exactly the confidential information is. When it comes to documents like these, the details matter. It would be very bad if important statements about the information were left out of the document and the receiving party takes advantage of that to sabotage whatever good was in motion.
A simple declaration of what the secret information is may not be enough to cover the entire idea, especially if it has to do with a concept or a process of manufacturing.
You may need to consult with someone if you find that the information is too complex for you to put down on paper, but to do this you may also need to sign a confidentiality agreement with he consultant. So basically, look for a way to cover all the angles of the secret information so that you know all aspects of the information are covered by this agreement.
THE PARTIES INVOLVED IN THE AGREEMENT
The disclosing party and the receiving parties have to be clearly addressed in the non-disclosure agreement. If it is a unilateral type of agreement then the disclosing party would have to find out the persons within the receiving party that have access to this information and make sure that the agreement covers them. The same goes for if it is a bilateral or multilateral type of agreement.
If a one word is appropriate to cover all the parties involved then that would be appropriate too. All parties involved in this agreement must be stated, including the various agents, vendors or directors that may have participated in getting this agreement off the ground. All must be addressed in the confidentiality agreement.
REASON FOR DISCLOSURE
If the other party needs the information to be able to execute the contract for which they were contacted, or the consultant needs the information to be able to consult properly then you need to make such reasons known within the document. Sometimes employees would need this type of information to perform their job tasks. This agreement is permissible in the court of law, so it is important to express all of the points mentioned here.
This speaks about the various aspects of information were this agreement does not cover, for example if the receiving party had gotten some information before this agreement was put together, then this agreement does not cover such information.
There are certain other information concerning the disclosing party, that the receiving party may have gotten on their own, through their own personal investigation before the agreement, or information that is already public knowledge. These and certain others could be excluded from this agreement as they were not the direct result of the disclosing party making it known to the receiving party.
OBLIGATIONS OF THE RECEIVING PARTY
This will include the use of the secret information in an in appropriate manner. This may also include that the receiving party does not have rights to whatever was produced while they were in the employment of the disclosing party.
This particular part of the agreement contains clauses that state that the parties involved did their very best to keep to the obligations of the agreement and so on. It is very important that these obligations be studied closely so that any of the parties involved would not have any reason to breach the agreement, hence falling into the hands of the law.
It states the duration the agreement would be kept by the parties involved. Some of these agreements may be in force for ever, so as long as all parties are on this earth they are never allowed to disclose the secret information.
However, some time frame could be anything from 6 months to 7 years or even till a particular project and/or event has occurred. Most times even after the term has ended, the disclosing party still owns the intellectual rights to the secret information and can decide how the information will be used.
PROVISION TO PREVENT BREACH
Should the receiving party decide sometime within the duration of the agreement to make the confidential information known, the disclosing party has the right to stop such action through an injunction clause within the confidentiality agreement.
So, before the receiving party would be able to leak such and information, the disclosing party would be able to stop this from happening by getting a court order. This clause has to be clearly written in the agreement, for all parties to see.
VARIOUS LEGAL STATEMENTS
These statements could include the nature of this binding agreement on heirs, the part of the government that will control this law, ownership of the secret materials, the recipient’s rights while entering into the agreement, the clarification of the relationships between parties, what kinds of penalties will ensue if there is a breach and so on.
The disclosing party would have to make sure that all foreseeable scenario was thought about and put in legal statements to protect the information they are about to share with the receiving party.
NAMES, SIGNATURES AND DATES
The names signatures and dates of all the parties involved in this agreement should be clearly stated in the agreement. All parties are required to read the agreement before signing, because once the document is signed any breach can call for the full force of the law.
WHEN A CONFIDENTIALITY AGREEMENT CAN BE LEGALLY BROKEN
In as much as a confidentiality agreement keeps things confidential by legal means, there are situations when this agreement can be broken. One of which is if an employee spots some type of illegal activity and chooses to be a “whistle blower”, court subpoena’s the information from the participating parties or certain specialized legal procedures are engaged.
So simply having this agreement does not provide total security for your information. But there are other things you can do to further secure your information, like ensuring that sensitive documents that have been used and are no longer necessary are destroyed totally.
Another thing you could do is to restrict accessibility to such information to a certain work level, maybe only higher management should know about these things; or even take the extra measure of marking these documents as confidential, this will ensure that those who handle such information do that with discretion.
Understanding what a confidentiality agreement is gives businesses and individuals more freedom to participate with other people when carrying out their day to day activities. The interesting thing is that you may not actually require a lawyer to put together a contract like this, if the information is important but the threat to your venture if the information leaks is not that damaging.
However, in any case I would like to strongly suggest you get a lawyer involved in going over the agreement. Lawyers are trained to see things within contracts that the average person may not be able to spot. You may decide to engage the services of a lawyer friend or better yet hire a professional, even if it is on a one-time basis, so they can look through the agreement.
On the other hand, you could pay a lawyer to draft out a more complex and professional confidentiality agreement. This of course would be the way to go if the information stands to damage your chances of advancing your business or idea. It would be very careless to draft something sketchy and get the parties to sign if the consequence of breach is devastating.
So, get a lawyer’s input when going into such agreements, and also explore other ways to protect your information. Either legally or otherwise, the confidentiality agreement is not the only way to ensure safety of sensitive information, but it is a start in the right direction.