Why you may need a confidentiality agreement template

Why you may need a confidentiality agreement template

It is crucial that you take the necessary steps to protect confidential and commercially sensitive information before you provide it to someone you want to do business with and who needs to see it.  In this blog, we look at when you might need a confidentiality agreement (or NDA), the different types to consider and some of the main provisions which are usually covered in a confidentiality agreement.

A confidentiality agreement (also known as an NDA or a non-disclosure agreement) is used in a wide variety of business situations. 

In summary, it is used to protect commercially sensitive and confidential information which one party is going to disclose to another party.  The disclosure of the information is usually a first step in a proposed business dealing or transaction between the parties. Before they are ready to disclose information and discuss their commercial relationship in detail, either one or both parties needs to receive the other party’s commercially sensitive information so that they can evaluate that information and use it to decide whether they want to proceed with the underlying business transaction.  

If the parties do not ultimately enter into that transaction, the party which has disclosed its commercially sensitive information will want the confidentiality of that information to be legally protected, both from further disclosure and from its use or exploitation.  This is achieved by having and NDA in place from the outset.

Examples of what NDAs might cover in business transactions include:

  • information disclosed by a company to a potential investor
  • information disclosed by a seller to one or more potential buyers of the seller’s company or business
  • information disclosed for particular business transactions, such as the exploitation of intellectual property owned by one party
  • information disclosed by an inventor, creator or originator of a product, service or business idea to someone who is going to fund its development or manufacture its production
  • information disclosed by parties who are considering entering into a joint venture 

What are the different types of confidentiality agreement template

NDAs can be either “one way” or “mutual”.

  • a “one way” NDA covers the situation where only one party will disclose confidential  information to the other party.  Typical examples are the sale of a company or business
  • a “mutual” NDA covers the situation where both parties will disclose their own confidential information to the other.  A classic example is a proposed joint venture where both sides will disclose its own confidential information to the other side

What are the main provisions of a confidentiality agreement template

NDAs vary in their complexity and length but (as well as usual legal boilerplate clauses) essentially cover the following principal matters:

  • the parties to the NDA
  • what information will be covered by the NDA (usually defined as “Confidential Information”)
  • whether the NDA is “one way” or “mutual”
  • the purpose for which the recipient can use the disclosed information
  • a restriction on the recipient disclosing or using the disclosed information other than for the specified purpose
  • the limited categories of people to whom the recipient may supply the disclosed information (for example, employees and professional advisers who need to know that information for the specified purpose)
  • exceptions to the prohibition on the recipient from disclosing the disclosed information (for example, if the recipient is required to do so by law or the rules of a stock exchange which apply to the recipient)
  • how long the restrictions last

Paper Rock confidentiality agreement templates

Our selection of template NDAs are all aimed at providing a solution which, whilst legally robust for the disclosing party, achieves a balanced position between the parties. 

Each template is written in plain English and is accompanied by clear explanatory guidance on the document and its use.  For more details, visit here.

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