A Confidentiality Agreement is a contract that legally binds two or more parties who agrees not to disclose particular information.

The agreement comes in different names like Non-Disclosure Agreement, Confidentiality Contract, Confidential Disclosure Agreement, Proprietary Information Agreement, or Secrecy Agreement.

Why Do You Need a Confidentiality Agreement?

Plenty of reasons makes the Confidentiality Agreement necessary. But let’s focus on the critical ones.

To maintain a competitive advantage. The confidential agreement creates surety that proprietary information like trade secrets and intellectual property doesn’t reach industry competitors, the public, or the media.

It set standards for handling information. The standards might include limiting access to information or using other methods like password-protecting files and preserve secrecy.

To protect information during mergers. Confidentiality agreement protects information about the business and purchase agreement until a merger or acquisition finalizes.

It presents a roadmap for legal action

What Does Confidentiality Agreement Do?

In any business, there are many assets to protect, including the company’s inventions, upcoming marketing campaigns, proprietary equipment or process, clients, and financial information.

Confidentiality agreement protects this kind of information from intentional or accidental disclosure of confidential information. The agreement come in two types:

The Unilateral Confidentiality Agreement—this protects the information you share

Mutual Confidentiality Agreements—which protects information between parties such as between you and your client or vendor.

What are the Limitations of Using a Confidentiality Agreement?

Confidentiality agreements aren’t for everybody. They don’t serve some situations correctly. Here are some of its limitation:

It can’t protect all the information like the information the recipient knew before signing the agreement, information the recipient learns from alternative sources or the info that the public already knowledge, and the information that is in public’s interest

Some states offer protection to the employee by not allowing the company to protect certain information, such as the harassing behavior of its executive.

When a third-party overhears information without knowledge of the parties discussing the topic, you cannot prosecute those sharing the information unknowingly.

If it gets to court, you may need to prove that the release of information caused monetary or other types of damage to your business.

In a court, it will require you to prove that the person you think leaked your information is the person who did. It might require proof such as emails or data from a hard drive.

What Might Happen if You Don’t Use a Confidentiality Agreement?

The worst that might happen is that your company may lose potential earning, brand recognition, name, and future business opportunity. All those losses may also take a significant mental toll.