Mutual confidentiality agreement
This mutual confidentiality agreement (sometimes called a non-disclosure agreement or NDA) enables parties to explore the possibilities for a deal before signing an agreement that covers the terms. Being a mutual agreement, both sides agree to the same terms of disclosure, but not necessarily the disclosure of the same information. This confidentiality agreement is a good way of protecting your secrets from being used by the other side if the deal doesn't go ahead. Examples of use might be: sub-contract manufacture; business acquisition; joint product development.
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About this mutual confidentiality agreement
This mutual confidentiality agreement should be used when two parties are exploring possible options for a deal and neither wants the other to profit from disclosing or profiting from secret or confidential information given during the process. It will help protect both parties' personal or business information and ideas.
There are lots of situations where you might want to disclose information that is private, valuable or both. Much of the time, the party to whom you divulge will be in a situation to be able to benefit from the using the information (perhaps in direct competition against you) or the passing of it on to someone else. You can use this confidentiality agreement to prevent them from acting on the information and thus for protecting your personal or business information or ideas.
The information in being protected can be something as basic as a customer list or as esoteric as a chemical formula. This document is drawn broadly to cover all information passing between the parties, but in a way that enables you to insert your own precise secrets if you want to specify them.
Of course total secrecy is best. But there are many occasions in the life of any business when discussions in advance of a deal involve talking about secrets of some sort. This agreement will allow you to be open with the other side, develop a more trusting relationship and, hopefully, agree to a deal on the best terms for everyone.
The document gives you choices as to how you want the recipient of your information to deal with it. You may limit disclosure to the person who signs this agreement or you may allow him to pass the information to professional advisers or employees or consultants. You decide.
Points to consider in how you manage confidentiality and non-disclosure
A non-disclosure agreement (NDA) is, for all purposes, a different name for a confidentiality agreement. “Non-disclosure agreement” is more commonly used in the USA and tends to suggest protection against passing-on of information alone rather than use of the information as well. The law in this agreement is basic contract law. It is strong and clear.
You should recognise that all the legal agreements in the world cannot prevent accidental or unintentional disclosure (for example, careless talk over a drink with a friend, or when leaving your documents out for public rubbish collection). A good confidentiality agreement (like this one) should therefore also cover what happens if the information is used or disclosed.
You can also manage risks by limiting the information that you disclose, and the people who know about it. Both these things are covered by this non disclosure agreement. Both individuals and business owners tend to be most diffident about asking for a confidentiality agreement from people they “trust” with their ideas, but who have no obligation to keep confidentiality (for example, potential investors, partners and customers). This is a great mistake. The upside of protection from insisting on an agreement far outweighs the downside of loss of private data.
Once enough information has been exchanged for terms of a deal to be agreed, a Net Lawman agreement (for example, a business sale agreement) will record the details and continue the requirement for confidentiality for as long as necessary.
When to use this mutual confidentiality agreement
Either party can initiate use of a confidentiality agreement. You can make the other side at ease by suggesting the use of one before they do.
The agreement should be signed before information is disclosed.
The agreement should be used when both parties are disclosing information to each other, for example, when:
- You are considering the sale of all or part of a business. The other party needs to know details of the business, but you need to know about the financial strength of the buyer;
- You are discussing how to integrate products or processes together;
- You are considering a joint venture or partnership and each party needs to know whether the other parties can bring what they claim to be able to do;
- You are collaborating on a project and expertise and knowledge will be brought together (e.g. one party may have designs and the other may have unique production processes to realise the design).
Net Lawman also sells other similar agreements for slightly different circumstances:
Only one party is disclosing information to others: Confidentiality agreement: single party disclosure
Information is being disclosed to a consultant, contractor or supplier: Confidentiality agreement: consultant, contractor or supplier
A creator of an artistic work wishes to show his or her work for third party assessment with a view to sale, publication, manufacture or use. This agreement expands on copyright protection: Confidentiality agreement for an artistic work
Confidentiality agreement features and contents
- Either or both parties can be individuals or businesses
- The information coming from one party can be quite different to the information coming from the other
- Can be used for a defined purpose, or generally
- The subject and nature of the information being kept confidential can be anything
The paragraphs in the agreement include:
- Definition of the confidential information: can be as broad or specific as you like;
- Excluded information;
- Security of disclosed information: how information must be kept and stored;
- Disclosure required by law;
- Ownership and warranty;
- Undertakings not to steal customers and staff;
- Other legal provisions to protect your interests.
This document was written by a solicitor for Net Lawman. It complies with current New Zealand law.
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