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If you want to talk to another business about the possibility of working together, you probably want to make sure that your commercial information remains confidential. You can keep your conversations private by signing a confidentiality agreement or non-disclosure agreement (NDA), which involves both parties promising not to disclose any information that you discuss. This article will look at time limits for the term of confidentiality agreements and limitation periods to take action against the other party if they share your information.

Why Use Confidentiality Agreements? 

confidentiality agreement is a legal document used to ensure that the parties you work with keep any information you disclose a secret. It will generally outline a period where both parties should keep this information confidential.

For example, you may have a new business idea that you are discussing with potential partners. Here, you will want to ensure they keep the information confidential until you release it to the public.

You may also choose to use a confidentiality agreement in your workplace when one of your employees has access to a lot of confidential information and you want to make sure they keep the information private.

Difference Between Confidentiality Agreements and Deeds

You may choose to use a deed rather than an agreement because it deed does not require consideration. Consideration is a legal term which means that both parties get something out of the transaction. This includes any benefit or compensation.

For example, it is sufficient consideration that an employee receives employment in exchange for their confidentiality. Or when sharing information with a potential business partner, the consideration is that they can make informed commercial decisions based on your discussion.

An agreement must have consideration to be enforceable. If there is no consideration, you should draft the arrangement as a deed. This will ensure that your adequately protect your information.

It may seem like consideration when both parties share, receive and agree to keep confidential information secret. However, this may not always be the case.

Deeds generally operate for longer periods than agreements, meaning you will have more time to enforce the arrangement if the other party has breached their confidentiality.

Key Terms in Confidentiality Agreements

1. Length of the Agreement

Confidentiality agreements will often require that information be kept secret for a certain period of time. This limitation is generally set at three years but can continue for whatever time frame you specify. These terms are especially relevant when discussing a business in its early stages of development. This is because you don’t want your idea stolen before you establish it.

For example, both parties may need to keep the information confidential for five years after forming the agreement.

However, agreements can also operate without a fixed term. This compels the parties to keep the information confidential until the agreement is terminated.

2. Obligation For Confidentiality After the Term

Confidential obligations under the contract may also operate beyond the specified term and the termination of the agreement. If you are working on a long term project or the information you share could be useful for similar competing products, you will want to make sure that the agreement operates for as long as possible. So you can bind the other party to keep the information confidential for the specified time as well as beyond that term.

Period of Enforceability After a Breach

Each State has different limitation periods in which you can bring an action against someone for breaching your confidentiality agreement. Generally, the time frame in which you can enforce a deed will be greater than that to enforce an agreement. You must action a breach of an agreement within:

  • Six years in New South Wales, Queensland, Victoria, Tasmania, South Australia and Western Australia
  • Three years in the Northern Territory

In contrast, you may action the breach of a deed within:

  • 12 years in New South Wales, Queensland, Tasmania, Western Australia and the Northern Territory
  • 15 years in Victoria and South Australia

For example, if a potential business partner shares confidential information contrary to the confidentiality agreement you have both signed, you will only be able to action a claim within the first six years of the breach.

Key Takeaways

Whether you decide to use a confidentiality agreement or confidentiality deed will depend on your individual needs. It will be more appropriate to prepare a deed if the arrangement does not benefit both parties or if you want a longer time period after the relationship ends to enforce the promise of confidentiality. If you are looking for advice regarding confidentiality agreements and deeds, contact LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page.

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