About confidentiality agreements

A Confidentiality Agreement, also known as a Non-disclosure Agreement (NDA), is a contract between two or more parties where the subject of the agreement is the exchange of information to be kept secret.

The confidential relationship between the parties to the agreement can either be mutual, where all parties are under an obligation to maintain secrecy, or unilateral, where only the receiving party is obliged to maintain secrecy.

A mutual agreement is useful when all parties will be disclosing confidential information.

A confidentiality agreement can be used to protect any information that is not generally known. It is really the creation of a confidential relationship, the terms of which are defined in the agreement.

Drafting a confidentiality agreement

A confidentiality agreement should:

  • create an obligation of confidentiality
  • restrict the use and disclosure of information
  • limit access to information
  • describe explicitly the items to be kept confidential

If the confidential agreement covers all these points it will then be easier for an organisation or individual to defend its rights if the confidentiality is violated.

When to use confidentiality agreements

A confidentiality agreement is the best way to protect business information that must be kept secret. It is particularly important if the holder intends to apply for an IP title, such as a patent, as it prevents any written description from being considered as published.

Why use a confidentiality agreement

A confidentiality agreement:

  • shows that a confidential relationship exists
  • gives written proof that a company considers the information disclosed as being confidential
  • provides continuing protection after the implied confidential relationship ends (e.g., restrict use and disclosure by former employees)
  • enables a person or organisation to state how and where any dispute will be legally settled

Last update: 22 November 2012

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