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What is a Confidentiality Agreement?

A confidentiality agreement is a contract in which the signing party agrees not to disclose any information about the other party in the contract. Confidentiality agreements, also called non-disclosure agreements or secrecy agreements, are often part of employment contracts. Employers will require their employees to sign such an agreement promising not to disclose information about the workplace.

Confidentiality Agreements are also used in business settings, but are often referred to as non-disclosure agreements.

Businesses or companies use confidentiality agreements for a variety of reasons:

  • To protect sensitive, technical, or commercial information from disclosure
  • To prevent the forfeiture of valuable patent rights
  • To define exactly what information can and cannot be disclosed
  • Protected trade secrets
  • Protect financial information or inside information not available to the public
  • To prevent former employees to give out private company information after employment term

What Is Protected Under a Confidentiality Agreement?

A confidentiality agreement is used in order to protect certain information that is secret or that is not intended to be shared with the general public. They are often used in an employment law setting. For instance, an employer may require a new employee to hire a confidentiality agreement, which states that the employer will keep company information confidential.

  • Machinery used
  • Technological Developments
  • Secret Processes
  • Future plans
  • Materials used or Ingredients
  • Prices
  • Data and Formulas
  • Employee work product
  • Other Items Specified in the Agreement

What is the Duration of Confidentiality Agreements?

Most confidentiality agreements will specify the period for which the agreement will cover. Also, the agreement is enforceable only if the information remains confidential. However, some confidentiality agreements may request that a party keep information confidential permanently.

Such information, however, should be essential to the business and be considered a trade secret before asking for a permanent confidential agreement. The scope, or extent, of the protection, must be tailored to the information being protected. Courts are reluctant to enforce agreements which ask for excessive levels of protection for information which doesn’t need that much confidentiality. 

What Are the Legal Exceptions of Confidentiality Agreements?

Although confidentiality agreements are a strong way to keep trade secrets, they are not a foolproof means. First, if the information is already in the public domain, than it cannot be protected as confidential information. Second, confidentiality agreements can be legally violated if revealing the protected information would aid in an investigation or case.
Third, confidentiality agreements are only between the parties which signed the agreement. If a third party outside the agreement reveals the protected information to the public, then the information is no longer considered secret. Finally, if the information were independently developed or discovered by a party to the agreement, then the agreement would not be violated.

How Are Confidentiality Agreements Enforced?

As a type of contract, the consequences of breaching of a confidentiality agreement will often depend on the agreement itself, as a well written contract will state the punishment for breaking it. As long as the punishment stated is not excessive in comparison to standards created by the law, the punishment will be enforced. If no such clause exists, a court may decide the appropriate course of action. Since breach of a contract is a civil matter, monetary compensation for the injured party will be the most likely response.

Breaches of confidentiality agreements are typically treated like most other breach of contract claims. In most cases, a breach of such agreements will lead to a damages award for any losses caused by the breach of confidentiality. Note that, in some cases, such a breach can actually cause a great deal of losses, especially if the business’ trade secrets are disclosed without authorization.

How Can a Lawyer Help?

If you are drafting a contract, an employment lawyer or commercial law lawyer will help guide you through the complicated legal process so that you will be able to protect your legal rights. In the event that your confidentiality agreement has been breached, an attorney can help you get the remedy you deserve and/or help you prevent future disclosures of confidential information.

Photo of page author Ken LaMance

, LegalMatch Law Library Managing Editor and Attorney at Law

Last Modified: 05-04-2018 01:43 AM PDT

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