Confidentiality Agreements Overview

Read what Net Lawman.co.uk says about when and how to use Confidentiality Agreements, often referred to as Non-Disclosure Agreements (NDAs), and its NDA legal templates:

What is a Confidentiality Agreement, when and how to use it

"Note that a confidentiality agreement is often referred to as a non-disclosure agreement or “NDA”. There is no difference in the meaning.

When you need to share sensitive information with someone, but don't want the information to be spread or used beyond your control, you can use a Confidentiality Agreement to agree the terms under which they can disclose it.

The agreement specifies what information you wish to protect and the extent (if any) to which the recipient of the information can share or use it. If the agreement is broken, or if there is a threat of breach, legal action can be taken.

Of course, nothing can prevent some person from stealing your secrets or passing them on. A legal agreement that he should not do so merely gives you a right to claim in court if he breaks that agreement.

There are many situations where you might want to disclose confidential information that is private, valuable or both. Much of the time, the party (whether a business or an individual) to whom you divulge will be in a situation to be able to benefit from the using the information (perhaps in direct competition against you) or from the passing of it on to someone else. You can use a confidentiality agreement to prevent them from acting on the information, and thus to protect your personal or business information or ideas.

The nature and subject of the information is not as important as how it will be used. The information being protected can be something as basic as a bank account statement or as esoteric as a chemical formula. These documents are drawn broadly to cover all information passing to the other party, but in a way that enables you to insert your own precise secrets if you want to specify them.

Even the signing of non-disclosure agreement reminds the other party that the information is sensitive, so he or she cannot later claim ignorance of its value to you.

You can also use these non-disclosure agreements to prevent a contractor or supplier from stealing your intellectual property or business “know-how”.

Netlawman- Guide

Terms to be included in a Confidentiality Agreement

"Generally, a Confidentiality Agreement will:

identify the parties to be bound by the agreement
state the context and reasons for the agreement
define what information is considered confidential
set out the length of time over which the agreement is to be upheld
specify the restrictions on the disclosure and use of the information
define exceptions to the restrictions
address the security of disclosed information
prevent solicitation of employees
specify ownership of information
include penalties or remedies for breach of contract

As well as identifying the discloser and receiver of information, the agreement should also ensure that the receiver is responsible for breaches by associates who may be privy to the information, such as co-directors, consultants and accountants. In some cases the discloser may insist on a separate confidentiality agreement for each of them.

Parties to be bound by the agreement

It should not be necessary to obtain a signed agreement from a solicitor, or accountant who is a member of a proper professional association.

Context and reasons for the agreement

This will vary depending on the situation.

An example could anything from a company and business purchase to an employer requiring an employee to keep business knowledge confidential during and beyond the term of his employment.

Definition of information to be considered confidential

It is essential that the information to be protected is clearly defined - the rest of the agreement uses this material as its subject.

It will be in the interests of the receiver to make sure that the information defined is not something they possess already, or they will effectively lose control of it.

The agreement cannot apply to information that is in the public domain already, so a definition of public knowledge is also often needed.

Length of time (or term) over which the agreement is to be upheld

For many purposes a long or indefinite term is preferable to ensure that the discloser maintains sole and continuing control of the sensitive information.

For example, an employee may still be bound by a confidentiality agreement after his employment has ended.

Restrictions on the disclosure and use of the information

The discloser will want to prevent the receiver from using the information for his own benefit or allowing it to enter the public domain. He may also want to prohibit the copying or retention of information.

Exceptions to the restrictions

It may be important that confidential information is shared for some purpose, and that this purpose is not restricted by the agreement.

For example if you are disclosing information about a business you own in the hope of selling it, the agreement must permit the potential buyer to use the confidential information to make their assessment of the business.

The receiver will want acknowledgment of certain exceptions as well: for example if an independent party not bound by any agreement discloses the information, or if they develop the same information independently.

Security of disclosed information

While a confidentiality agreement cannot fully protect against accidental or unintentional disclosure, it can specify that the protected information be held in a secure way to prevent this. The discloser may also require any records of the information to be returned or destroyed after a specified time.

Prevention of solicitation of employees

This is not regularly seen in an NDA, but we believe it is important, and a source of litigation, so we give it to you for extra protection in Net Lawman document templates. It may be the case that one party will not proceed with a business deal but will attempt to "poach" employees from another business.

The agreement can help prevent this from happening.

Ownership of information

The document will state which party is the originator of the confidential information and acknowledge any intellectual property rights, copyright or patents.

Penalty clauses and remedies for breach of contract

The discloser may wish to put a value on the confidential information, as a sum he can claim to if the contract is breached.

Some information, such as entrepreneurial ideas, can be very difficult to value. In those cases it may be more appropriate to provide for the remedy of an injunction - a court order to prevent specified action.

For some situations it may also be a good idea to include a confidentiality clause that requires that the agreement itself is kept secret."

Netlawman- Guide

What is in these legal templates?

First and foremost, we provide a very wide definition of confidential information so that you can easily edit it to cover your precise requirements.

These documents give you choices as to how you want the recipient of your information to deal with it. You may limit disclosure to the person who signs this agreement or you may allow him to pass the information to other professional advisers or employees or consultants.

All our non-disclosure agreements:

can be used when either or both parties are individuals or businesses
are fast to put in place: our guidance notes make completion easy
provide strong legal protection
can be used to protect defined information, or generally
are suitable for any sort of confidential information
cover the security of disclosed information: how information must be kept and stored
comply with the requirements of the Data Protection Act 1988

Points to consider in how you manage confidentiality and non-disclosure

You should recognise that all the legal agreements in the world cannot prevent accidental or unintentional disclosure (for example, careless talk over a drink with a friend, or when leaving your documents out for public rubbish collection).

You can manage risks by limiting the information that you disclose, and the people who know about it. Both these things are covered by our non disclosure agreements. We all tend to be diffident about asking for a confidentiality agreement from people we "trust" with their ideas, but who have no obligation to keep our secrets safe, (for example, friends, potential investors, partners and customers). This is a great mistake. The upside of protection from insisting on an agreement, however awkward, far outweighs the downside of loss of private data.

Once enough information has been exchanged for terms of a deal to be agreed, another Net Lawman document (for example, a business sale agreement) will record the details and continue the requirement for confidentiality for as long as necessary.

Either party can initiate use of a non-disclosure agreement. If you are the receiver of information, you can make the other side at ease by suggesting the use of one before they do.

Remember to be sure that an agreement is dated and signed before information is disclosed."

Netlawman- Guide

Injunctions: types and uses

"Injunctions are orders of court that prevent someone from doing something to the detriment of someone else, such as an infringement of rights or harm.They are most commonly used to protect someone from domestic violence, whether that is the spouse or partner of the violent person, a child, or someone else. However, injunctions can also be used in other ways, including in business circumstances."

Netlawman- Guide

Why an NDA doesn't protect your ideas as much as you might like

"It is becoming increasingly common for employers to ask new employees to sign a non-disclosure agreement or NDA, with the aim of protecting the business’ intellectual property. Non-competition terms, preventing the employee from working in too similar a job should he or she decide to leave can also be included in such a document.

The reason for the increase in use is a reflection of the change in how value in a business is created. Particularly for technology companies, whose products and services take time to bring to market and thus which have little revenue, much of the valuation of the business is based in the IP.

NDAs are not, however, a failsafe solution to protect ideas.

Many venture capital firms refuse to sign a confidentiality agreement before considering investment in a company. Although disconcerting to the business owner, the VC firms are correct - agreements take time and expense to put in place, for little protection."

Netlawman- Guide

Detailed guidance notes are provided with each template. Net Lawman offers a money back guarantee if the document is not what you need, as well as a legal review option if you want some professional assistance when you are drawing up your documents.

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