Sunday 22 July 2012

The concept of confidentiality agreements


There is continuous struggle for improvement in the corporate world. The organizations keep focusing on doing innovations every day in order to capture market shares. Similarly organizations struggle to become number one in their line of business. For that sometimes organizations try to adopt unjustified ways in order to make their competitors loose. They try to get confidential information about their competitors in order to inflict them heavy losses. Such competitors get ruined once they lose confidential information by any means.
There are hundreds of agreements signed between various parties every day. Similarly there are many agreements that have a major role in the corporate world. Confidentiality agreements have a vast usage in the corporate world as all the leading businesses of the world enter into these agreements in routine practices. There are many categories of these agreements and most businesses enter into multiple of confidentiality agreements in routine practice for the same reasons.
Confidentiality agreements are all about making things secure. They ensure that nothing confidential goes into the wrong hands. Even if something gets in the wrong hands then the parties in the agreement can be taken to task. There are adequate remedies available as per the terms of confidentiality agreements. The organizations facing troubles because of disclosure of data or information are entitled for such remedies once facts are proven against any of the parties in the agreement.
Confidentiality agreements are signed between two or more than two parties. They are legally enforceable at all places around the world.  The courts all around the world recognize them and decide matters of disputes regarding them on merits as per the local laws. In this kind of agreement the parties agree to share some secret data or information which is not shared in normal circumstances. The parties are liable to abide by the terms of confidentiality agreement once they give their consent to it.
Confidentiality agreements can be long and they can be small depending upon many factors. Usually the practice is that parties enter into simple agreements that are not very lengthy. However professional organizations prefer to have detailed agreements so that their rights and interests are protected in the best manner possible under such agreements. The detailed agreements have various sections and parts. There are various provisions in them which can be invoked in order to deal with all kinds of disputes and violations arising at later stages. In absence of any such provisions the agreements are useless at times and are a problem for the parties so consenting to them.
A confidentiality agreement is probably the best tool which a business can have. Whenever a business has to trust another business or individual to the extent of disclosing non public information then such business should enter into a confidentiality agreement. The interests of such a business regarding the disclosure of data and information can be best protected under this agreement. For the same reasons this agreement is widely under use in all kinds of businesses around the world with having good legal sanctity.
What are the various forms of Confidentiality agreements?
There are many shapes of confidentiality agreements. The reason is that the local laws regarding these agreements differ from place to place. Similarly there are different practices in different areas of the world in the similar manner. There are many names used for these kinds of agreements at different places around the world. Some of the commonly used names of confidentiality agreements are:
·        Secrecy agreements
·        Non-disclosure agreements
·        Proprietary information agreements
·        Confidential disclosure agreements
All of these agreements are almost the same in their essence and they are all in professional use by various organizations around the world. They are legally enforceable and challenge able in most of the courts around the world. The terms of these agreements play vital role because at most of the places the terms of such agreements are given preference over the local laws. The courts decide the disputes according to the terms of these agreements in most of the cases as the local laws give them importance and preference.
Confidentiality agreements can be signed between any kinds of parties. The parties signing confidential agreements can belong to one organization and they can be from different organizations entering into a single project or venture. No matter whatever the form of a confidential agreement is it gives fruitful results at the end of day. There is no harm of entering into one such agreement whenever the confidential information or data is at stake.

What is the purpose of Confidentiality Agreements?
One of the basic purposes of confidentiality agreement is to protect the information from getting into the wrong hands. This kind of agreement restricts the flow of data and information to the third parties. The parties to the agreement remain loyal with each other with strictly professional attitude once they execute this agreement with each other.
There can be various purposes for which parties enter into confidentiality agreements. In most of the cases the data and information which the parties cannot share elsewhere is specifically mentioned in the terms of confidentiality agreement. That forms a relationship of trust between the parties and they are liable to keep that trust intact as long as their relationship is governed by such agreement.
A purpose of this kind of agreement is to make things clear to the parties beforehand. Whenever parties have to share secret information then it is best to settle things before moving ahead. The parties should know what to do and what not to do so that problems do not arise at later stages. That makes things easier and secure for all the parties that enter together in a confidentiality agreement at the end of day.
One of the purposes of confidentiality agreement is to improve the performance of parties to the contract. When parties enter into a confidential agreement then targets are achieved in the best possible manner. The performance of parties to the confidential agreement increases many folds in the presence of such agreement. The reason is that the parties trust each other and they move ahead with professional attitude and enthusiasm to work in the best possible manner.
The parties in a confidentiality agreement know their limits well. They do not try to exceed their limits because they know consequences of that very well once an agreement is there. The parties feel comfortable and relaxed when the agreement is there. They do not have any fear of getting deceived from the other parties in the agreement. In the end the venture or project which is carried out by the parties together turns out to be a major success. The goals are achieved and the future targets are set on the bases of improved performance by all the parties.
Can trade secrets be part of Confidentiality Agreements?
There are many businesses that enter into confidentiality agreements in routine practice. They do that because they have to trust parties in order to carry out some important business ventures with them. They share trade secrets with the parties in the confidentiality agreements so that they can move forward in the best possible way. They share information and data which they never do otherwise after consenting to such agreements. This helps the parties in making the impossible things into possible once they move ahead together.
Whenever two businesses enter into a joint venture, merger and any other similar kind of business activity then they have to share lots of knowledge for getting success. That knowledge is usually a combination of confidential and non-confidential data and information. If such knowledge gets into the hands of competitors of one of the businesses in the joint venture then that can cause some real problems.  The knowledge that is of non public nature should never be disclosed and for protecting that confidentiality agreements play their role.
Confidentiality agreements are always signed between the organizations whenever they go for mergers. In such cases the information is usually provided by both businesses to each other and they become bound to not to disclose that to the third parties. In most of the cases the businesses doing merger have difference of nature of businesses and they cannot misuse the information for themselves. However when such data or information reaches the competitors of any of such businesses in merger then that can be really harmful for both.
Even in absence of a confidentiality agreement the businesses are ethically bound not to share the information of other businesses in their partnerships. However things become professionally protected under the umbrella of a confidentiality agreement. Trade secrets get protected legally when a confidentiality agreement is there. The businesses never think of taking undue advantages of other parties in that way.
Can the confidentiality agreement be signed between individuals?
Confidentiality agreements are not only signed between organizations rather they can be signed between individuals. There can be an individual signing a confidentiality agreement with the organization in certain situations. The need of the agreement always arises whenever an individual or a business has to understand things done by a business in running its affairs. There can be secret processes containing top secret information regarding production, sales, marketing and other departments. It becomes important at times to give access to that information to other parties in the agreement.
In many organizations it is a practice that the organizations get this agreement signed with all the employees that work in it. The reason is that the employer doesn’t want its confidential information to get into the wrong hands. Similarly some organizations enter into confidentiality agreements with all the small vendors that transact with them on routine bases. There is different nature of businesses and similarly these agreements are signed accordingly.
Whenever a confidentiality agreement is signed between parties then it can have provisions to restrict all the parties as well as one single party. When an agreement restricts both the parties from disclosing information then it is a mutual confidentiality agreement. In such kind of agreement the information is usually disclosed by all the parties and they enter into agreement so that they do not cheat each other. Similarly the agreement can be a simple one imposing restrictions on one party only and it is referred as a unilateral secrecy agreement. In this kind of agreement the secret information is disclosed by one party to the other and the other party is bound to keep it secret under the provisions of the agreement.
An aspect is that most of the confidentiality agreements are mutual in nature. That way such agreements restrict both the parties to the agreement from disclosing any kind of data or information to the third parties. Such kinds of agreements appear fair from their very essence and they create rights and obligations on both ends rather than putting only one party under the obligations.

Should the receiver be protected in confidentiality agreements?
Majority of the confidentiality agreements made these days are simple. They are problematic for the receiver in that way because they do not protect him or her. There should be adequate clauses in the confidentiality agreements that should protect the receiver in cases where no wrong is done by him or her. The receiver is legally bound to protect the information and data which he/she receives from the party in the contract. If any information or data is received by receiver from the third party then the doctrine of privities of contract doesn’t apply. For the same reasons the agreement should contain adequate clauses for that.
There are always chances of a receiver that he/she might get information or data from other sources then the parties in the agreement. In such cases the receiver is not legally bound to keep such information so obtained as a secret. Even the moral obligation is not there in many instances and circumstances come in which such receiver has to disclose such information to third parties. In such cases the receiver should be protected according to the terms of the agreement so that no problem is faced if no wrong is done by such receiver.
What can be penalty in case of violation of confidentiality agreements?
There can be a strong penalty if the secret information or data is disclosed in violation of the confidentiality agreement. The provisions of the agreement determine the penalty in most of the cases. In absence of any such provisions the damages can be in accordance with the loss faced by one or more than one parties.
In some of the confidentiality agreements there is a time period mentioned. The parties are bound to keep the data and information secret till that time period if it’s mentioned. Such data and information should not be shared in any way with the third parties if no such time period is mentioned in the agreement.



What things should be included in the confidentiality agreements?
There are many things that are generally included in the confidentiality agreements. Some of these things include:
·        The date on which the agreement is signed between the parties.
·        The particulars of parties in the agreement. There can be two or more than two parties.
·        Definition clauses. There can be definition of things that are confidential and things that are non-confidential in the nature. Things that can possibly fall under the definition of confidential are also mentioned at times.
·        Nature of business, information regarding vendors, suppliers and customers can be mentioned in the confidentiality agreement.
·        Time period for keeping the information secret is mentioned in the agreement. The time period can be more then the time period of a particular venture or project. For example there can be a limit imposed of two years after the project ends to keep the information or data secret.
·        Things that fall under the category of permissible disclosure are sometimes mentioned in the agreement. The clauses of permissible disclosure are there to protect the interests of receiver at times. The information and data which is public or the one that is received from other sources usually fall under the category of permissible disclosure.
·        The obligations that are created once the agreement is signed are mentioned in detail in most of the professional secrecy agreements. These obligations include details about circumstances in which the disclosed information can be used and in which the same can be restricted of use.
·        The measures that should be taken ordinarily to protect the information and data should be mentioned. The measures taken to protect the information whenever it’s subjected to further disclosure are also mentioned at times.
·        Remedy available to either of the parties in case one or more than one party violates the terms of agreement is mentioned specifically. It can be in shape of damages, compensation and in shape of actions to be taken to make things right in the best possible manner.
·        The forums to address in cases of disputes are mentioned in the agreement. Similarly whenever the court demands any information then its method of disclosure is part of professional agreements in this respect.
There are many different practices regarding the confidentiality agreements in different parts of the world. There are various formats used in the making of such agreements in different areas. Laws are very much different between states when it comes to USA and Canada. So the confidentiality agreements are different between states to states and between countries to countries.
How to make a confidentiality agreement?
This is modern era with having all kinds of facilities easily available. One can easily find confidentiality agreement samples these days. There are websites that provide confidentiality agreements free of cost to all. One can easily download few samples, templates and examples of confidentiality agreements these days for using as a reference.
The easiest way of making confidentiality agreement is to use the forms. There are confidentiality agreement forms available over the internet having simple and easy nature. Anyone can fill up those forms and once they are executed they take the shape of agreements. There are blank spaces on those forms which are required to be filled up with information. The information usually required on these forms includes the particulars of parties and simple terms so that parties become legally bound to follow them.
The professional way is to make a confidentiality agreement with keeping each and every word under special consideration. Relying on a sample confidentiality agreement is not a feasible option for big businesses. For the same reasons all the professional organizations hire professional law firms so that they get the confidentiality agreements that stand for them in cases of disputes. The confidentiality agreements made by big businesses usually have complicated terms and conditions which protect them in cases where such agreements are violated.
An aspect is that the confidentiality agreement should be made in accordance with the local laws. For example if there is a confidentiality agreement required in the US State of Texas then it should be in accordance with the local laws of that State. Similarly it should have proper format that is in practice in the US State of Texas. There should not be any provisions in such agreement that makes it non-enforceable in nature.
The agreement should be complete with having all the relevant provisions in it. There should not be any missing links in the agreement. It should have all the necessary provisions as part of the terms so that in times of need everything is covered under the agreement. For that it is best to hire the services of professionals or at least samples made by professionals should be seen before the final agreement is drafted.
The person drafting the confidentiality agreement should have a legal sense. Only that way such person can make an agreement that can protect the rights of all the parties in the agreement. Similarly the parties become legally bound to follow the terms of confidentiality agreement when they know that it is complete and they can be taken to task if they violate the agreement once it’s executed. 


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