Your ideas and sensitive business information make your business unique and stand apart from competitors. Using a Confidentiality Agreement will ensure your ideas and business information are protected and used only for the specific purpose for which they were supplied.
What is a Confidentiality Agreement?
A Confidentiality Agreement is a contract that safeguards your valuable business ideas and information. This document prevents the recipient of your information from sharing what they know with others. You may have heard of documents called a Non-Disclosure Agreement (NDA) or a Secrecy Agreement. These are just other names for a Confidentiality Agreement.
Confidentiality Agreements can be used to protect things such as:
- information about your product idea,
- business plans and budgets,
- marketing plans,
- financial information,
- unpatented inventions, trade secrets, and software
Do I need a One-Way or a Mutual Confidentiality Agreement?
There are two types of Confidentiality Agreements.
- One-Way Confidentiality Agreements – these are used when only one party is disclosing confidential information, and the other is obligated to protect it; and
- Mutual Confidentiality Agreements – these are used when both you and the other person / business disclose confidential information, and both sides are required to keep that information secret and use it only for a specific purpose.
What are the key features of a Confidentiality Agreement?
|A definition of the confidential information: this can be a general catch-all definition or specifically state what the confidential information is being shared||FY2021 financial accounts, or draft marketing plans relating to the new range of hair care products.|
|The specific way that the recipient can use the confidential information: this is also known as the “purpose”||to analyse the FY2021 financial accounts to decide whether the investor wants to invest in the business; or to review the marketing plans relating to the new range of hair care products to enable a PR agency to provide a quote on the product launch.|
|Exceptions to the stated purpose: these are situations that don’t breach the confidentiality agreement if they occur||maybe the FY2021 financial information can be shared with the investor’s accountant or other advisors.|
|The term of the agreement: this is a term that explains how long you want someone to keep your information confidential||the draft marketing plans would only need to be confidential until the product launches|
|And any consequences for breaching the agreement: in legal terms, these are called “remedies”, and will usually prevent the other party from doing something or force them to do something if they breach the agreement.||If the agreement is breached you could claim monetary compensation or go to court to stop the recipient from sharing the confidential information|