Click on any of the questions below to reveal the answer.
What is a Confidentiality Agreement?
- A Confidentiality Agreement is an agreement between persons to keep specified and proprietary information confidential. It is used when one person, who is the owner of confidential information, wishes to disclose it to another person (or persons) and wants it to remain confidential.
The agreement may be between companies or individuals or a combination of both. A Confidentiality Agreement may take one of two forms, either:
- One party discloses confidential information to another party ("One-Way"), or
- Both parties exchange confidential information with each other ("Two-Way")
By signing a Confidentiality Agreement, the person receiving confidential information undertakes the obligation not to disclose the confidential information described in the agreement.
What is a Non-Disclosure Agreement or NDA?
- There is no difference between a Confidentiality Agreement and a Non-Disclosure Agreement (sometimes referred to as an "NDA"). They are the virtually the same document with different names and have the same legal effect. It is just that some people refer to the agreement to keep private and confidential information from the public as “non-disclosure”.
What can be classified as confidential information?
- Confidential information may be anything from a:
- Business idea
- Software program
- Formula or recipe
- Plan to make or sell something, etc.
The confidential information may be in the form of:
- Written words
- Oral description
- Software code or in electronic form
- Musical notes, etc.
Confidential information may be translated from the original form, modified, updated or altered information. Existing common law protects you to some extent from other people stealing your trade secrets or passing off your trademark as their own. Unfortunately it is not always possible to protect all your confidential information under these laws. A Confidentiality Agreement will strengthen this protection and provide peace of mind.
What can not be classified as confidential information?
- The type of information that can be included under the umbrella of confidential information is virtually unlimited. However, any information that is already known to the other party or is in the public domain cannot be defined as confidential information. Additionally there may be information that is confidential to you but may not be legally considered confidential information.
Can I limit what is confidential or the time period for confidentiality?
- Yes. You can limit the confidential requirement to either specific information and/or for a specified period. You can specify what information you consider confidential, provided it is not publicly available.
Who is covered or prevented from disclosure by a Confidentiality Agreement?
- The recipient of the confidential information is prevented from disclosing this information. If it is necessary to disclose the information with any of their colleagues, advisers or employees, then the confidentiality agreement requires them to be under the same duty of confidentiality.
When should I use a Confidentiality Agreement?
- You should use a Confidentiality Agreement when you are about to disclose valuable and confidential information to another person, either for them to assist you with it or for any other reason that you may need to let another person know about your information. Here are some examples of when Confidentiality Agreements should be used:
- Discussing a business idea between two parties
- Disclosing company secrets or proprietary information to a potential buyer of the business
- Revealing a new invention, idea or process to a developer, sub-contractor or manufacturer
- Employees, consultants or contractors working with you who may be exposed to sensitive or confidential information
- Sharing information to progress the development of a patent or copyright idea before or while it is being registered
- Negotiations or discussions over artistic creations or inventions
- Getting advice on personal financial circumstances
Can my confidential information ever be disclosed without my approval?
- Yes. There are limits to confidentiality. In some instances, another person may be “compelled” or required to disclose your confidential information. For example:
- The Australian Taxation Office has special powers over financial institutions and accountants
- Courts can subpoena confidential information
- Employees "whistle-blowing" on illegal, corrupt or dangerous activities
- Specific legislation (e.g. under the Privacy Act for OH&S purposes)
Four Confidentiality Agreement templates are in the package. Which one should I use?
- Different levels of Confidentiality Agreements and arrangements are required depending on individual circumstances or stages of discussion.
- The Email template is a short, yet effective version of a Confidentiality Agreement that can be agreed by both parties in an email. It is not necessary for either person to sign it for it to be effective and create the confidential protection. Use it for preliminary discussions and to get moving quickly on discussions with an interested party.
- The Letter template is a short, clear Confidentiality Agreement, designed to create the confidential protection but through a hard-copy paper/letter format. Both parties must sign the agreement. Use this format to emphasize the importance of your confidential information before signing a more formally agreed understanding.
- The "One-Way" template is a more complete agreement where one person is giving confidential information to another and wants to ensure the information is further protected. Both persons are required to sign, agreeing to the terms.
- The "Two-Way" tem plate is also a more complete agreement but is used where both persons are providing confidential information to each another and they wish to ensure the information is further protected. Both persons are required to sign, agreeing to the terms.
During initial discussions you might want to start by using the Email template. Then as discussions progress you could be more formal and move to the Letter template. Then before final negotiations the "One-Way" or "Two-Way" template forms of the agreement could be used. For larger or more important transactions, "Two-Way" agreements are recommended.
What is the difference between a "One-Way" and "Two-Way" Confidentiality Agreement?
- A "One-Way" Confidentiality Agreement (also referred to as a "Unilateral" agreement) is used when one person (the "Provider") will disclose confidential information to someone else (the "Recipient") and the Recipient agrees not to divulge this information to others. This is a non-reciprocal arrangement, where only the Recipient is prevented from disclosing any confidential information.
A "Two-Way" Confidentiality Agreement (also referred to as a "Mutual" or "Bi-lateral" agreement) is used when both parties are disclosing confidential information to each other. For example, they may be considering a partnership in a business, buying something together or developing something together and both people have confidential information to share with one another. Both parties agree not to disclose this confidential information and both people are under the same duty of confidentiality, as both are prevented from disclosing any of the confidential information provided by the other person.