What is a Business Confidentiality Agreement?

Also known as a non-disclosure agreement (NDA), a business confidentiality agreement is a legally binding document that prohibits one or more parties from disclosing certain information outlined in the contract. The confidential information referred to in a business confidentiality agreement typically includes data like proprietary information or trade secrets that an individual or company may be privy to during business interactions and which is otherwise not made available to the general public. It might also refer to information about the organization’s stakeholders or future plans for the organization that are not known by the general public.

A business confidentiality agreement can be designed to protect the party who’s created the agreement, sometimes referred to as a “one-way NDA”, or to protect both parties, called a “two-way NDA or “mutual confidentiality agreement.” In addition to clearly outlining which parties are bound by the contract, a business confidentiality agreement should also indicate whether it covers a specific time period such as one year or “in perpetuity” (indefinitely). It’s also not uncommon for a business confidentiality agreement to claim the rights to any material that the other party creates for the company in relation to the confidential information. For example, an employee or contractor who designs applications for a company’s proprietary technologies might be bound by the agreement from using the technology elsewhere, such as with a competing organization.

Organizations that are interviewing job candidates or meeting with other professionals to discuss joint ventures will often ask the outside party to sign a business confidentiality agreement before proceeding. Even if the outside party doesn’t end up working with the company, there may be confidential information about the company that needs to be disclosed for the purposes of the initial meetings.

A business confidentiality agreement will sometimes include clauses that limit the liability of the signee under special conditions. For example, a clause might state that signees are is exempt from the agreement if they’re being questioned in a court of law. The agreement may also provide exception to confidential information that the signee obtains through a third party, as well as information the signee was privy to before signing the business confidentiality agreement.