What is a Confidentiality Agreement?

A confidentiality agreement, which can also be called a non-disclosure agreement or NDA. Is a simple contract between two or more parties in which the subject of the agreement is a promise that the information exchanged is kept secret. Agreements like this are considered mutual in that the information exchanged by both parties in the agreement is considered to be confidential. In rare cases agreements like this are unilateral where only one party in the agreement is obligated to maintain secrecy.

Mutual non-disclosure agreements can be especially useful when both of the parties involved will be exchanging confidential information, like in inventor groups. Unilateral confidentiality agreements are probably the most common in the inventing area when one person is sharing private information. Likely they are sharing information with potential investors or prospective licensees. 

A confidentiality agreement can be used to guard any type of information that is not generally known. When you create a non-disclosure agreement you are really creating a confidential relationship with the parties involved. In general, when a confidentiality is created it is created to protect information that is exchanged both orally and in writing.  However, it should be noted that some courts do not enforce oral non-disclosure agreements. You should never rely on an oral non-disclosure agreement. When it is possible it is always advisable to get a confidentiality agreement in writing.

The primary reason why you should never rely on an oral non-disclosure agreement is because it is very difficult, if not impossible to prove its existence. If something goes wrong and you need to prove that a non-disclosure agreement exists it essentially becomes you word against the word of the other parties involved. So, it is hard to enforce the agreement. For this reason, whenever it is possible you should get your confidentiality agreement in writing.

There are many benefits to having a confidentiality in place. The primary benefit of having a non-disclosure agreement in place is legal. If someone signs the agreement and then breaks the agreement they can be held legally liable. You can sue that party I a court of law for damages. Without a non-disclosure agreement in place your confidential information is not protected.