How to Navigate Confidentiality Agreements

What is a Confidentiality Agreement?

Confidentiality agreements are commonplace in the business world, but can be tricky to navigate.  A confidentiality agreement is a legally-binding contract that protects confidential information, (think new inventions or products or trade secrets). Such agreements generally are drawn up to keep information out of the hands of competitors; and allow two parties to conduct business with the promise that any information exchanged will be kept private.

Mutual and Unilateral NDA

A confidentiality agreement, also known as a nondisclosure agreement or NDA can be mutual, where both parties agree to keep each other’s information private; or unilateral, where only one party has to maintain confidentiality. Mutual non-disclosure agreements are common for businesses entering into negotiations with other businesses.The purpose is to protect sensitive information, ensuring it will not end up in the hands of competitors. Unilateral confidentiality agreements are used when one party shares private or sensitive information with the other party, and wants to make sure the information does not get out.

Keeping the Lid on Sensitive Information

Once a confidentiality agreement has been signed, both parties are required to keep the designated information private. The signed agreement makes it illegal for parties to pass on information in any way that would upset competitive advantage by divulging what could be considered a trade secret.

When Should a Confidentiality Agreement Come into Play?

Confidentiality agreements not only are used when two businesses or parties are embarking on a joint business venture.  They also are used by employers and companies with current employees, and during the hiring and interviewing processes. Employers or business owners may ask existing employees or independent contractors to sign an NDA to protect privileged company information; but some organizations also require candidates applying for a job to sign a confidentiality agreement.

Don’t Spill the Beans!

As with any legal document, it is imperative that you have a clear understanding of what the agreement entails.  Confidentiality agreements are intended to protect sensitive information.  Breaching such contracts could result in lawsuits, criminal penalties, loss of business relationships, and/or loss of employment.



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