Vital Elements of a Confidentiality Agreement

A confidentiality agreement (also known as a non-disclosure agreement) protects your company’s trade secrets and proprietary information from being exposed to the public. Such agreements are usually common in companies involved in research and design, manufacturing and technology. However, they can also apply to companies in other industries.

There are two main types of confidentiality agreements which businesses can use; one-way and two-way agreements. One way agreements forbid a single party from disclosing information availed to them. This kind of agreement is normally used with independent contractors and employees. On the other hand, two way agreements are commonly used in corporate mergers, joint ventures and strategic partnerships. This is where two or more parties exchange proprietary information with each other.

Non-disclosure agreements can be as simple as a confidentiality clause in an employment contract. It could also be a multi-page, complex document which has numerous details. When the stakes are high, it would be advisable to hire the services of a qualified attorney to craft a tailor-made document for the agreement.  

The effectiveness of a confidentiality agreement is determined by the amount of details contained in the document. Any loopholes could result in the loss of your sensitive company information. Here are some of the crucial details that need to be included in the agreement:

1. Parties

The non-disclosure agreement should begin by clearly defining the parties involved. These could be organizations, companies, individuals, or a mixture of the three. In case one of the parties is left out, the non-disclosure requirements will not apply to them.

2. Description of information

The description of what information is considered confidential is the main thing that will determine the effectiveness of the agreement. Therefore, you need to include as much detail as possible to ensure that all the legal loopholes are covered. The description could cover details such as financial information, business processes, business strategies, vendor lists, customer lists and verbal representation.

3. Exclusions

This section should specify what kind of information is excluded from the agreement. Some of the details that are usually exempt are subpoenaed information, public information and prior knowledge. However, you could include many other kinds of information in your exclusions section according to your discretion.

4. Term

Confidential agreements are usually valid for a specific duration, after which the agreement is no longer considered binding and the information no longer considered confidential. This term should be clearly mentioned in the non-disclosure document.

5. Obligations

After describing what information is considered confidential, you need to mention the limits imposed on its use. The other party might only be allowed to use the information in certain ways, but not others.

6. Provisions

At the end of the agreement, you should have provisions which address how perceived legal breaches will be resolved. Such arbitration procedures will make it easier to deal with problems in the future.

Applying the tips mentioned above will ensure that your trade secrets and proprietary information remain protected. Neglect them at your own peril.


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