A Confidentiality agreement is a legally binding contract that establishes a confidential relationship. The party or parties signing the agreement agree that sensitive information they may obtain will not be made available to any others.
While certain confidential information may not require continued confidentiality beyond the conclusion of the business relationship, others will demand continued secrecy. There is no universally accepted length, however average secrecy periods range between two and five years.
Also known as non-disclosure agreements (NDA), they should be used when sensitive information needs to be shared between two parties. NDAs are private agreements between the parties and do not require registration. They are often used to protect confidential information and trade secrets. In this article, how long do confidentiality agreements last, we take a look at the process and mechanism involved.
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Mis-use of confidentiality agreements
The UK government has announced legislation barring firms from using confidentiality agreements to prevent employees from disclosing information to law enforcement, regulated health and care providers, or legal professionals.
While the government acknowledged the legitimacy of confidentiality clauses included in employment contracts or settlement agreements, it stated that they should not be used to intimidate harassment and discrimination victims.
Employers may not impose confidentiality limits on employees in order to prevent them from reporting discrimination or sexual harassment to the police, doctors, or solicitors. Additionally, legislation will ensure that individuals signing NDAs understand their provisions and will increase employees’ access to independent legal counsel when signing settlement agreements at the conclusion of their employment.
Are there different types of confidentiality agreements?
Confidentiality agreements may be unilateral or mutual. Use a one-way confidentiality agreement if you are the only party sharing information; a mutual confidentiality agreement if both parties are disclosing information.
If the agreement is unilateral, executing it as a deed may be necessary to secure its enforceability. This is a fairly straightforward process; so, avoid artificially changing a one-way agreement to a bilateral agreement.
If neither you nor the other party to the agreement share a common country of residence, the agreement must specify the applicable legislation. Bear in mind that England and Wales have a distinct legal system from Scotland. Additionally, it must name the courts that will enforce it. There should be no country’s courts with exclusive jurisdiction. In the event of an unauthorised disclosure, you may attempt to enforce the confidentiality agreement in another country.
What should be included in a confidentiality agreement?
You should determine the scope of your confidentiality agreement. It may protect only material that has been recorded in some way and is labelled ‘confidential.’ Additionally, it can safeguard information shared during meetings or presentations.
A well-drafted agreement limits the use of ideas and information to a single allowed purpose. This might be an assessment of your idea or a dialogue about a joint venture. Specify that goal as precisely as possible in the agreement. You can always later broaden the permissible purpose. However, you will be unable to further restrict the usage of your ideas or information in the future.
You should maintain realism. The individual with whom you are speaking may need to share your information with others. This could include their direct reports or professional consultants. Additionally, they may require a copy of your information for this purpose. Confirm the confidentiality of these disclosures to employees and professional advisers.
Consider the duration of the agreement. It is not uncommon for it to be limited to three or five years. They will then have the ability to use and disclose your information. An agreement cannot be enforced once information is made public in any way.
Certain information may be kept confidential in perpetuity. Several examples include the following:
- non-patentable know-how
- lists of customers
- personal information about the individuals involved in a project
Certain businesses or organisations may ask you to sign a paper acknowledging that they are not obligated to maintain the confidentiality of your ideas or information. If that is the case, you must consider whether you are willing to take the risk of sharing your thoughts with them.
When should you use a confidentiality agreement?
When managing a business, every aspect of your management style may be beneficial to another. You can protect nearly anything, to the extent permitted by law. Thus, a confidentiality agreement should be broad in scope, including “everything,” rather than focusing exclusively on a few tightly defined topics.
A confidentiality agreement can be used in a variety of situations to preserve sensitive material. Bear in mind that you should not provide sensitive information to the other party until the agreement you wrote or approved has been signed and returned by the other party.
Several common instances in which a confidentiality agreement may be used include the following:
- Prior to an entrepreneur presenting important ideas with potential funders, manufacturers, licensees, or marketing firms.
- During the onboarding process for new workers who will have access to sensitive information that could be used against the organisation.
- By enterprises that are required to share confidential information with contractors or service providers. Trade secrets, manufacturing specifications, invoicing data, and customer data are all examples of valuable information.
- During the sale of a business or merger negotiations. While it is necessary to supply vital information in order to evaluate the businesses, this information must be protected in the event that the purchase is not completed.
- By an individual who wishes to share their creative work without risk of it being copied or distributed without their permission.
Are there limits to a confidentiality agreement?
Naturally, a contract is only enforceable against the party who signed it (or the organisation he or she represents). Thus, a company director’s signature does not bind a firm associated with him or an expert he has called to the meeting automatically. Similarly, the agreement cannot safeguard against unintentional or accidental information disclosure.
The constraint of a confidentiality agreement is that it must strike a balance between the discloser’s wish to protect his information and the recipient’s desire to avoid legal repercussions. The discloser will want the agreement to be as comprehensive as possible to cover all possible instances in which information could be shared without his approval. On the other hand, the recipient will want the information to be used freely and without fear of being served with a writ.
Many venture capitalists looking for entrepreneurial opportunities will be hesitant to sign a confidentiality agreement. At this point, the entrepreneur must decide whether to trust the potential investor and take a chance on his concept, or to provide as little information as possible.
What are the ramifications of breaking the agreement?
The agreement may include restrictions and sanctions for breach. There may be an agreed upon monetary amount to be paid as compensation to the wronged party. However, in other instances, valuing the ownership and privacy of secret information can be extremely challenging.
How we can help
We have a proven track-record of helping clients with their confidentiality agreements. We will guide you through the process and ensure all checks are carried out swiftly and efficiently and we firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.
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It is important for you to be well informed about the issues and obstacles you are facing. However, expert legal support is crucial in terms of saving you money and ensuring you achieve a positive outcome.
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Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
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