Contracts Confidentiality and Non Disclosure Law and Legal Definition

Confidentiality and non-disclosure agreements are used to impose confidentiality obligations on parties receiving information on materials from disclosing parties which consider such information or material to be confidential. Drafting the appropriate contract requires consideration of some key issues. One important consideration is to identify, with particularity, the information which is confidential. There may be limitations on what information is deemed confidential, such as information already known to the signing party, or information made public, through government agency order, etc. Another issue is whether you are the party receiving or disclosing such information. A further issue concerns the duration for keeping the information confidential. Finally, consider whether the confidential information also qualifies as a trade secret. Also important is an explanation of the purpose for disclosure, i.e. when confidential information is only revealed to another party for a specific purpose. The agreement should set forth what the purpose is.

Other provisions that are commonly found in confidentiality agreements include:

  • a provision allowing the remainder of an agreement to stay in effect even if a portion of the agreement is found to be unenforceable,
  • a provision stating that the agreement is binding on heirs and assigns,
  • a provision calling for a return of confidential materials after use by Recipient,
  • a provision stating that the Discloser has the right to receive an injunction from a court if the agreement is breached,
  • a provision specifically specifying that the Discloser owns all confidential information,
  • a provision specifying that disputes should be arbitrated, and
  • a provision governing the controlling law for the contract.

The information sought to be protected must protect a legitimate business interest. For example, if the information sought to be protected is considered a trade secret by the company but is well known throughout your industry, then at least that part of a non-disclosure agreement is probably not enforceable. For a trade secret to be protected against disclosure, it must be truly confidential, have commercial value, and pose a threat to the company's operations if disclosed or put to use by the employee.