Anatomy of a Confidentiality Agreement – Essential Clauses You Need

Confidentiality agreements, or non-disclosure agreements (NDAs), are essentially types of contracts that allow the parties to discuss certain matters openly, without fear of either party leaving the conversation and sharing that information with third parties not privy to the agreement.

NDAs have become critical at all stages of business, especially at the early stage, as they allow a party to share innovative ideas knowing that they are backed by an agreement which outlines certain rights and obligations in black and white. So, the question is: what are a few essential clauses to have in a confidentiality agreement?

Setting Out Definitions

The first question to be asked is – what constitutes confidential information? The definition of confidential information should match the type of discussions that will take place between the parties. This will inevitably vary from case to case; however, it is often the case that a wide and all-encompassing definition is drafted to serve as a catch-all for anything that might not be envisioned from the outset.

Secondly, why are the parties entering into this confidentiality agreement? The purpose needs to be adequately drafted to capture why the confidentiality agreement is required. A high-level overview would usually be able to encompass the relevant information; however, attention also needs to be given to whether subsequent negotiations and discussions would also form part of the agreement.

Disclosures – How, Why and When

After setting out what is important to protect through the agreement, the next step is to identify, restrict and limit subsequent disclosure. A series of clauses that restrict how information can be shared is vital in a confidentiality agreement. Whilst there will need to be some exceptions to this, having a well-defined permitted disclosure clause is always beneficial. Some exceptions might relate to disclosure within organisations, where information would need to be shared with other employees and agents. However, even when disclosure is permitted, restrictions will still apply and may limit sharing to individuals on a ‘need to know basis’ and to other representatives who are subject to another confidentiality agreement.

Termination, Duration and Deletion

There are various instances in which a confidentiality agreement may be terminated, and the impact of such termination may have significant ramifications. One vital point relates to the duration of confidentiality obligations following termination. This needs to be adequately worded to state that, following termination, the parties will still be under an obligation not to disclose any information for a certain period of time. The duration is very much dependent on the type of information being shared, as well as subsequent

negotiation. Further to that, an obligation to delete or return any and all confidential information upon request is vital.

Worst Case Scenarios?

Whilst most confidentiality agreements tend to act as a deterrent, worst-case scenarios need to be considered in the event of an unauthorised disclosure. Consequences that can arise from a breach of the confidentiality agreement may vary but could include damages, an injunction or an account of profits. Whilst a variety of these remedies may be drafted into a confidentiality agreement, each case will depend on its specific circumstances.

Moving Forward

The drafting of a confidentiality agreement is as important as anything else that is business-related. It serves as an important tool in your arsenal, allowing you to discuss matters openly, negotiate with peace of mind and proceed with caution.

If you do have something you would like to share confidentially, the most important thing is not to disclose it before you have the confidentiality agreement in place. This will ensure that any disclosure is made appropriately.

If you would like assistance with drafting or reviewing a confidentiality agreement, get in touch at info@briffa.com. Whilst these are just a handful of clauses that would be important to have, our solicitors would be more than happy to assist you!