Confidentiality Agreement

When parties enter into business arrangements, they generally provide information to each other which may be of a confidential nature. It is therefore, necessary, for them to enter into a Confidentiality Agreement whereby any unauthorized disclosure by the parties is prohibited. A Confidentiality Agreement between parties XYZ and ABC should typically contain the following clauses:

Definition of what constitutes “confidential information”

Indicate that the kinds of information have been mentioned on an “includes but not limited to” basis. You may include commercial, technical, financial information; trade secrets; software; designs; trademarks; copyright; studies; reports; marketing plans; business strategies; customer lists; employee details; etc.

If any particular kind of information is excluded from the scope of “confidential information.” Information generally not considered confidential includes:

Information that is in the public domain;

Information that is required to be disclosed under any law, rule, regulation or statutory compliance;

Information which was already in possession of the party to whom it is disclosed;

Information that is developed independently by the party to whom it was disclosed.

The duration of the Agreement and till when it will survive : In some cases the Confidentiality Agreement survives for a certain time even when the business arrangement is over, say about a year.

Termination clause stating the grounds for termination:

Breach of the Agreement is a ground for termination.

There may be a clause included saying that the Agreement can be terminated by mutual consent of the parties in writing.

Non-disclosure clause:

Confidential Information should be kept in safe custody by the party to whom disclosure has been made.

Disclosure cannot be made to any third party.

No publishing of the information in any way.

Employees of the party to which information has been disclosed should use best efforts to make sure that no unauthorized disclosures are made.

Information will be used solely for the purpose of the business arrangement between the parties.

No reproduction/copies of the information can be made without the consent of the party giving the information.

Documents, etc. to be returned on termination of agreement or on request

On termination of the Agreement, all documents and other material provided must be returned by the party to whom the disclosure has been made and a notarized certificate should be provided stating that all the documents, materials, etc. have been returned / destroyed.

No rights created under the Agreement:

The Agreement does not in any way create a license in favour of the party to whom the information is disclosed and all intellectual property rights shall remain vested in the party providing the information.

No representation or warranty regarding information:

The party providing the information does not make any representation or warranty regarding the accuracy or completeness of the information.

Consequences of Breach of Agreement:

A number of remedies maybe adopted in case of breach of agreement including cease and desist notice to stop unathorised use of the information, damages, etc.

Right of inspection:

Party providing the information should be given the right to inspect the premises and records of the other party (after giving them prior notice) during business hours on business days to make sure that the information has not been disclosed and has been kept in safe custody. 

No agency or partnership deemed to be created:

No relationship of agency, partnership, etc. is deemed to be created between the parties by virtue of the Agreement.

Standard clauses including Amendments, Severability, Jurisdiction, etc.