Please keep in mind that this is not legal advice. The information provided herein is for educational purposes only. If you believe you require assistance in reviewing, drafting, negotiating, etc. a Confidentiality and Non-Disclosure Agreement, then you are encouraged to seek a professional (e.g. make a post on Dynamic Lawyers).
Confidentiality and Non-Disclosure Agreements (also known as NDAs) are nothing more than ordinary contracts with specific terms related to the idea that one party (disclosing party) is going to provide information of a confidential nature to the other party (receiving party). Breach of a Confidentiality and Non-Disclosure Agreement may result in a claim that can be enforced by going to court, through equitable remedies such as an injunction, or as otherwise set out in the agreement itself (e.g. arbitration, etc.). In what follows, I’ll provide some general issues that are dealt with in these types of agreements.
1. Consideration
Like all commercial agreements, a Confidentiality and Non-Disclosure Agreement requires something that’s called “consideration”. Consideration is something of value given by both parties to a contract that induces them to enter into the agreement. Consideration is typically something like money for goods or services, etc. One party receives something of value and the other party receives something of value. This makes the contract valid, binding, and enforceable. For a Confidentiality and Non-Disclosure Agreement, the consideration will likely be part of the overall agreement (e.g. I will give you confidential information to do something and then I’ll pay you in exchange for that something).
2. Definition of Confidential Information
Defining confidential information is of utmost importance. The disclosing party will cast the net wide here to increase the receiving party’s obligations and liability with respect to the information it receives; the opposite is true of the receiving party (who wants a narrow definition of confidential information). Examples of types of confidential information include trade secrets, proprietary information, know-how, or information described in a Schedule. Use of a Schedule should still include an accurate definition of confidential information. Sometimes, a disclosing party will also say that anything it labels confidential will be considered confidential information as well.
3. Exclusions from Confidential Information
Most confidentiality agreements will normally contain various exclusion clauses which outline the types of information which are deemed not to be confidential within the terms of the agreement. Generally, these types of exclusions will include:
- information which is publicly available (i.e. information in the public domain);
- information which is already known to the recipient at the time of its disclosure to the recipient by the information provider;
- information which is received by the recipient from a third party who is not in breach of any confidentiality obligations to the information provider;
- professional expertise which the recipient had at the time of disclosure or which the recipient developed or enhanced as a result of reviewing the information or material provided; and
- information which the recipient is required by a court or regulatory body to disclose.
4. Limitations on Use of Confidential Information
The uses the receiving party is permitted to make of the confidential information should be clearly specified in the agreement. This will ensure that the recipient does not use the information for any other purpose.
5. Who Should be Bound by the Confidentiality Agreement
A Confidentiality and Non-Disclosure agreement may need to bind all relevant parties (e.g. parent companies, subsidiary companies, directors, officers, employees, representatives, etc.). In many cases, it is not practical or necessary to obtain signatures from all relevant parties; in these cases, the receiving party should acknowledge and assume responsibility for making sure that these relevant parties comply with the agreement.
6. Required Protective Measures to be Taken by Recipient
The Confidentiality and Non-Disclosure agreement may include a provision requiring the receiving party to take all reasonable measures available to it to keep the confidential information in the strictest confidence. Such reasonable steps may include:
- Electronic security (e.g. confidential information may be stored on a computer, server, network, cell phone, etc.);
- Physical security (e.g. confidential information may be in a filing cabinet, on a desk, in a box, etc.);
- Visitor control;
- Controls over photocopying confidential information; and
- Document and computer network control systems which limit access to the confidential information to those who are cleared for such access.
7. Return of Confidential Information
The Confidentiality and Non Disclosure Agreement may need to specify that, upon request, all of the confidential information, in whatever format, should be returned to the information provider and that all memoranda or other ancillary documents prepared by the recipient and based on the confidential information be destroyed.
8. Injunctive Relief
An injunctive relief clause may be included wherein the receiving party acknowledges that monetary damages may be an insufficient remedy and that the disclosing party should be entitled to injunctive or other equitable relief for any breach of the Confidentiality and Non-Disclosure agreement. In most cases where confidential information is being disclosed, the disclosing party cannot wait until a court determines the amount of monetary damages suffered. Here, the disclosing party will want to immediately apply for an injunction prohibiting any further disclosure of the confidential information.
9. No Liability Regarding Information
The agreement should make it clear that the disclosing party is making no warranty or other commitment regarding the accuracy or completeness of any information provided, and that there is in fact no obligation to provide any particular information to the other party.
In case you’re looking for an Ontario Mutual or One-Sided Confidentiality Agreement, then look no further:
Confidentiality and Non-Disclosure Agreement (Mutual)
This Agreement can be used to restrict both parties’ use and disclosure of confidential information that is being provided to it. If only ONE party is sharing confidential information and want to restrict the other’s use and disclosure of that information, then you can purchase a ONE-SIDED Confidentiality and Non-Disclosure Agreement:
Confidentiality and Non-Disclosure Agreement (One-Sided)
Here’s the sample Video Guide that comes with the Confidentiality and Non-Disclosure Agreement (Mutual):
Here’s the sample Video Guide that comes with the Confidentiality and Non-Disclosure Agreement (One-Sided):
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