There are a number of reasons why you should consider having a confidentiality (also known as a non-disclosure) agreement.  A confidentiality agreement can be vital to protect your trade secrets, key financial information, sales and marketing strategies or just to keep your offers quiet during a negotiation period.

Writing a confidentiality agreement can be a tricky task – here are some starting points you should consider.

Don’t just use a template

You need to make an agreement which is specifically tailored to your business and the risks you face.  This will not be achieved if you get a random template from the internet.

Ask yourself if you really need a confidentiality agreement

There is no point adding red tape for the sake of it, only write a confidentiality agreement if the other party is going to be dealing with confidential information (see the examples listed below).

Define and specify what confidential information is

The agreement will need to state what you mean by ‘confidential information’ and this definition may include:

  • technical information
  • inventions
  • patents
  • trade secrets
  • proprietary ideas
  • potential new products and services
  • research and development information
  • profits and margin information
  • customers and clients
  • financial projections

Typically, a confidentiality agreement will require the recipient to agree that they will not disclose any of this confidential information to anyone.

Alternatively, a slightly narrower approach would be to limit the ability of the recipient to share the confidential information within its own organisation, unless forced to do so by law.

Duty to protect all other confidential information clause

You should also include a general confidential information clause which states that any other confidential information which is disclosed and identified as confidential is also protected by the agreement.

Changes to the agreement

You should have a section which states that any changes to the agreement must be in writing and must be signed by both parties.

Add a severance provision

A severance provision means that if any clauses within the agreement are found to be non-enforceable they do not affect the enforceability of the rest of the agreement. Effectively, the non-binding provisions will become ‘severed’ from the agreement.

No special rights

You should add a clause which clarifies that the confidentiality agreement does not give the other party any special rights to that information such as licences, particular authority or intellectual property.

No purchasing rights

It’s also prudent to add a clause that states that the confidentiality agreement does not place either party under a particular obligation (for example, to purchase products or finalise a deal).

Permitted use

The agreement should explain that the only permitted use of the confidential information is for the purpose for which it was disclosed (for example, evaluation of the business and investment relationship with the discloser).

Remedies

You should explain which remedies will be available to the party who may suffer as a result of the other party revealing the confidential information.  In most cases, this will be monetary compensation or damages.  In other cases, it might be more appropriate to push for an injunction – which prevents parties from continuing to disclose the information.

Conclusion

Giving confidential information to someone can be a nerve-racking experience and unfortunately, failing to protect yourself can lead to long term damage that is often hard to reverse. One of LegalVision’s contract lawyers can write up a confidentiality agreement, for a fixed fee, that fits your needs and best protects your confidential information.

Lachlan McKnight

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