A confidentiality contract, also known as a non-disclosure or secrecy contract is made by two or more parties where one doesn’t want the information to be released to others in an organisation or the general public. They are usually used by companies to protect the interests of the firm so that business secrets are not let out to rival companies; they can also protect a new product, technical idea or may involve confidential information on trade secrets.
There are many functions of a confidentiality contract:
- Protection: The most obvious reason for a confidentiality contract is of course protection of sensitive information from disclosure to others and breach of this contract can result in legal action against one.
- Patent rights: Confidentiality contracts can stop the violations of patent rights. Disclosure of an invention can be fined as a forfeiture of patent rights of a particular invention but a confidentiality contract can prevent such a situation.
- Information: A confidentiality contract specifies what information can and cannot be divulged. This makes it easy for both the parties to know what their boundaries are.
When drafting a confidentiality agreement, these points must be kept in mind:
- The contract must mention a time period within which confidentiality must be maintained and when can information be disclosed.
- The contract must clearly mention what needs to be kept as business secret and what can be revealed.
- The name and the position of the parties must be mentioned clearly.
- In case it is a contract between an employer and employee, the latter may be asked not to disclose business secrets, client or product information, strategic plans, remuneration figures and so on.
- Ideally, a confidentiality contract must offer an option under which the employer may allow or give permission to the signer to disclose company information.