What is the Purpose of a Confidentiality Agreement?

The purpose of a confidentiality agreement, sometimes referred to as a nondisclosure agreement or NDA, is a written agreement or understanding between parties that information will be maintained in secret, not shared with anyone else or used in ways that are not in accordance with whatever contract exists. 

Most recently, an example of a time in which confidentiality agreements would have been utilized, was the recent wedding of the Duke and Duchess of Sussex. Everyone from the wedding dress designer, to the caterers, the photographers, and the baker of the wedding cake were required to sign confidentiality agreements, ensuring that they would not leak or provide any details of the upcoming nuptials to outside sources.

When a confidentiality agreement is signed, should there be a breach of contract, it is permissible to take legal action.

Ultimately, a confidentiality agreement exists for any of three reasons:

  1. The protection of sensitive information and the allowance of legal action to be taken, should there be a breach of contract.
  2. The protection of patent rights if the confidentiality agreement is being put into place regarding new invents, technology, etc.
  3. Ensuring that all parties involved are clear on what information is to be kept private.

While we may often hear of confidentiality agreements being used in the scope of celebrity-- so that those whom they employ cannot spill private details of life or habits-- there are any number of other situations in which a confidentiality agreement may be worth utilizing. Some of these include:

  1. If two businesses are considering a merger and wish the details of such to remain under wraps, they may both sign a confidentiality agreement.
  2. Employees may sign confidentiality agreements if they have access to sensitive or patented information that the employer wants to ensure does not get into the hands of a competitor.
  3. In order to protect trade secrets, it is particularly important to utilize a confidentiality agreement, as without one, the sensitive or classified information will no longer be considered a trade secret, should it be somehow be made public.
  4. If someone is providing access to a new design or idea that has not yet been patented, and is therefore not yet protected under patent or copyright laws.

While there are certainly those specific instances in the business world or realm of celebrity in which confidentiality agreements are customary, the truth is that anyone can enter into a confidentiality agreement to protect information they do not want getting out or being made public. Essentially, there are no limits as to what can or cannot be included in a confidentiality agreement. Additionally, they are perhaps more customary in today’s society than you think. In addition to the obvious cases of attorney-client confidentiality, or doctor-patient confidentiality, there are even protections that exist regarding what a librarian can or cannot tell someone regarding your reading habits.

Mutual Versus Unilateral Confidentiality Agreements

Confidentiality agreements generally fall into one of two categories: mutual or unilateral. The key points between these two types of agreements are:

  1. In a mutual confidentiality agreement, both parties are legally obligated to maintain secrecy. Should either one break that deal, the other party (or parties) may take legal action to recover damages.
  2. Mutual confidentiality agreements are generally used when all parties involved may be providing sensitive information. An example of this may be two inventors providing access to schematics, designs, technology, etc., so that they may work together to create another mechanism or device.
  3. Typically, a unilateral confidentiality agreement is used when only one party is under a legal obligation to maintain secrecy. Many employees sign confidentiality agreements when being hired at a new job. Additionally, this type of confidentiality agreement is generally what is thought of when it pertains to the above-mentioned privacy of celebrities or royal weddings.

Things to Consider

While some jurisdictions do recognize the legality of oral or verbal confidentiality agreements, it is always best to obtain the agreement in writing, with original signatures of all parties involved. As it is very difficult, if not impossible, to verify the existence of an oral agreement, it may be not be possible to seek damages or take other legal action, should there be a breach of contract. Times in which an oral confidentiality agreement will be upheld include cases of what is shared in a group therapy session, a 12-step meeting ( Alcoholics Anonymous), or what is said between a religious leader ( a priest) and a member of their congregation.

If you need help with understanding the purpose of  confidentiality agreements, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law, and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.