Free Confidentiality Agreement

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Whenever sensitive information needs to be shared between two parties it is a good idea
to use a confidentiality or non-disclosure agreement. This agreement will help formalise
the relationship and provide legal remedies if the confidential information is released.

Confidentiality Agreement

Alternate Names:

A Confidentiality Agreement is sometimes referred to as a:

  • Confidential Disclosure Agreement (CDA)
  • Confidentiality Contract
  • Proprietary Information Agreement (PIA)
  • Secrecy Agreement (SA)

What is a Confidentiality Agreement?

A Confidentiality Agreement is a contract in which one party agrees to the disclosure of sensitive or private information as part of a business transaction with another party.

The recipient of the information (an individual or a company) will only be permitted to use the information for a specific purpose as detailed in the contract by the information provider.

For instance, if a corporation is partnering with another business, they might have access to business plans, financial data, and employee records for the purposes of auditing the worth of the company, but they will be prohibited from sharing that information with a competitor or taking advantage of contact details and employment records to poach employees.

Confidentiality Agreement vs. Non-Disclosure Agreement

A Confidentiality Agreement (CDA) and a Non-Disclosure Agreement (NDA) are generally the same thing. Both documents are meant to protect confidential information from becoming public. However, different industries may refer to them differently.

For example, an IT company might use a Non-Disclosure Agreement when negotiating deals with other corporations because, in those instances, they might have to divulge some of their intellectual property, and they need to prevent the other party from using that information against them, e.g. by taking it to a competitor or exposing it to the public.

Similarly, a private consultant might be subject to a Confidentiality Agreement to ensure that any sensitive information divulged to them by their client remains private.

What can a Confidentiality Agreement be used for?

A Confidentiality Agreement can be used for disclosure to an employee or contractor, disclosure as part of a potential sale, or disclosure of an invention.

Typically, the information that individuals or businesses want to keep confidential includes:

  • Customer information
  • Intellectual property (including copyright, patents, and trade secrets)
  • Marketing information
  • Business operations
  • Product information
  • Service information
  • Proprietary computer technology
  • Account information

In addition to specifying the information being protected by the CDA, there should also be a statement of what constitutes permitted use of the information in question.

For example, the information provider(s) might state that the recipient may use the confidential information to weigh the risks and benefits of licensing the provider's intellectual property. Any other use of the information would be considered a breach of the confidentiality contract.

Can there be other clauses in a Confidentiality Agreement?

In addition to protecting private information and specifying uses for disclosed information, a Confidentiality Agreement (CDA) can include the following additional clauses:

A non-compete clause prohibits the recipient of the information from starting a competing company or divulging the confidential information to another competing company.

A non-solicit clause prohibits the recipient from poaching employees from the information provider.

The effects of these clauses are limited to a certain period of time. If the period is too long it could be challenged in court as being too onerous or anti-competitive and ruled unenforceable. What the court considers reasonable will depend upon industry norms and the employment or business opportunities in the market.

The obligation to keep the disclosed information confidential is also usually subject to time limits. There is really no standard time limit as it often depends on the relationship between the parties, but generally a limit of one to five years would be common. Again, if the period is deemed unreasonably long in the particular circumstances, then the CDA may be difficult to enforce.

On the other hand, certain categories of information, such as trade secrets are appropriate to be kept confidential indefinitely.

A general rule to bear in mind is that a Confidentiality Agreement will not be effective or enforceable in the event that the confidential information (even trade secrets) which it protects becomes public knowledge through no fault of the parties.

Related Documents:

  • Cease & Desist Letter: a letter that requests an individual or business stop doing something and refrain from doing it in the future
  • Employment Contract: a contract that describes the rights, responsibilities, and obligations of an employee
  • Partnership Agreement: an agreement that describes the responsibilities and obligations of partners in a business relationship
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