What Is a Confidentiality Agreement?

A Confidentiality Agreement, also known as a Non-Disclosure Agreement, is created by an individual or business (the disclosing party) to prevent an employee, consultant, or potential buyer (the receiving party) from revealing their private information.

The document:

• Describes the knowledge, data, and processes under protection
• Outlines the terms of confidentiality, including how long the information will remain private
• Confirms the receiving party's agreement to the terms of the contract
• May allow the disclosing party to take legal action if the receiving party breaches the contract

When Should I Use a Confidentiality Agreement?

You can use a Confidentiality Agreement to:

• Protect your business information when hiring new employees
• Keep your personal and business details private when using freelancers or independent contractors
• Keep company information and purchase details secret during a business sale, partnership, or merger
• Prevent your invention or proprietary idea from being shared by evaluators or investors

What Should I Include in a Confidentiality Agreement?

A Confidentiality Agreement includes important details such as:

• The reason for a contract, such as employment or a potential sale
• Categories of protected information, such as accounting data and customer records
• Information on the parties signing the agreement
• How long the obligations of non-disclosure will continue
• Rules for non-competition and non-solicitation

What Information Can Be Protected by a Confidentiality Agreement?

It's important to list the specific information you want to protect, including:

• General business operations, such as purchasing and personnel records
• Marketing and development, including promotional campaigns and pricing
• Accounting records containing revenues, costs, and profit targets
• Intellectual property, such as copyrights and trade secrets
• Proprietary software and technology
• Customer data, such as client lists and contracts
• Product design and production processes
• Customer service guidelines

What Is the Benefit of a Non-Compete Clause?

A non-compete clause provides additional protection for your business.

Use it to prevent the receiving party from:

• Starting a company that will directly compete with your own
• Working for or providing information to a business that directly competes with yours
• Taking customers away from you