A confidentiality agreement is a legal contract signed by two or more parties binding them to keep confidential information protected from third parties. A confidentiality agreement is also known as a non-disclosure agreement. In other words, the party signing it agrees that they will not disclose certain information made available to them to other people.
As a business owner, you need to keep valuable information private. It is essential to prevent contractors and employees from disclosing certain vital elements you have developed to differentiate you from your competitors. Furthermore, you may handle sensitive information about your customers. Clients do not want their personal information exposed, and sometimes that information is also protected by law.
Business owners and entrepreneurs exchange highly confidential information when they make business deals. Signing a confidentiality agreement is an effective way to protect sensitive data from being misused or shared. A non-disclosure agreement is a valuable tool for companies. It is used to establish business relationships between two or more parties, ensuring that those involved will not share or profit using private information.
If you need help to identify the sensitive data handled by your business and carefully create a non-disclosure agreement to be signed by your cooperators, you should seek advice from a Connecticut Business Law Attorney. Your company needs to make a confidentiality agreement that can protect your business.
What Is A Trade Secret?
Information that maintains a competitive edge in a business is called a trade secret. This trade secret might be exclusive processes, specific technology used, vendors, or other information that give a company their competitive advantage to the market. Confidentiality agreements are mostly used when new employees and independent contractors are hired to provide confidential information to them.
When Should We Use A Confidentiality Agreement?
Business owners should introduce a confidentiality agreement at the beginning of a cooperation that requires disclosing sensitive information. If a party denies being bound by a non-disclosure agreement, it is an indication that this working relationship may be challenging. A confidentiality agreement indicates securing trust between two parties. Consequently, failure to implement a non-disclosure agreement may lead to bitterness, hostility, or even expensive legal procedures.
Confidentiality agreements usually include terms that remain in effect beyond the end of the working relationship. For instance, if you introduce a non-disclosure agreement between you and an independent contractor, it can remain in effect even after the end of your cooperation.
Moreover, confidentiality agreements are also used in business transactions, like buying or selling a company. During business negotiations, sensitive information is shared. For instance, in a meeting with potential buyers of a business, the company’s details will be discussed thoroughly. The potential buyer will have access to proprietary information like trade secrets, marketing plans, and product designs used as leverage in other business transactions. In this case, signing a confidentiality agreement will prevent the potential buyer from misusing or sharing this information.
If a confidentiality contract is breached, then the injured party can seek financial compensation from the party that violated the agreement’s terms.
There are two types of non-disclosure agreements. Unilateral and mutual. In a unilateral contract, only one party agrees not to disclose confidential information, while in a mutual agreement, all of the parties agree not to disclose sensitive information.
What Does A Non-Disclosure Agreement Include?
Non-disclosure agreements should be written clearly and in detail. The contract should clearly specify the parties’ names bounded by the agreement and describe and identify the confidential information. You should be extremely careful in the way you define confidential information within the contract.
Furthermore, you should avoid using vague categories of information that may be considered invalid if a dispute leads to a lawsuit.
Depending on the type of confidential information, the time the non-disclosure agreement protects the data must be reasonable.
Suppose you fail to enter a confidentiality agreement and protect your confidential data. In that case, you will most probably also fail in proving that someone betrayed your trust and disclosed certain information that should be kept private.
Contact A Business Law Attorney
Drafting and reviewing contracts can be complicated. Our team of experienced business law lawyers are here to help you protect your business. Contact us at Aeton Law Partners to book your free consultation appointment. We can help you define your business’s sensitive information and guide you in creating the appropriate non-disclosure agreement to be signed with your cooperators and keep your business safe.