Confidentiality Agreements For Small Businesses

In a Confidentiality Agreements, also known as a Non-Disclosure Agreement (NDA)

, two parties agree in writing to keep certain information confidential between them. While it is advisable for small business owners to secure the services of an employment or intellectual property attorney, non-lawyers with business experience can draft said contracts independently if they keep in mind the principles outlined in this article.

The confidentiality agreement must first identify the parties involved. In a confidentiality agreement, there is usually a "??Disclosing Party"?? who is anticipating that it will be disclosing confidential information as part of the arrangement, and wants to keep this information confidential. Likewise, there is a reciprocal "??Receiving Party"?? who will be receiving the information, and will be under an obligation to maintain the information in confidence. The Disclosing Party wants to use the Agreement to give legal force to the Receiving Party"??s promise not to disclose the information. In order to do so, the Agreement must be carefully drafted to explain the obligations of the Receiving Party.

Generally, the Receiving Party should be required to "??hold and maintain the Confidential Information in strictest confidence for the sole and exclusive benefit of the Disclosing Party."?? To make sure confidential information remains in confidence, the Receiving Party shall also agree to "??carefully restrict access to Confidential Information to other employees, contractors and third parties as is reasonably required."?? If, for instance, confidential information must be revealed to third parties, such as outside contractors, towards the end of successfully completing the project, the Agreement should recite that "??the Receiving Party shall require those persons to sign nondisclosure restrictions at least as protective as those in the underlying Non-disclosure Agreement."??

In addition to restricting disclosure of confidential information, many companies also choose to restrict the use to which the confidential information may be put to. For instance, an employer may wish to restrict their employee from not only disclosing confidential information to outside parties but, also, from using confidential information for any matter but employer business.

The relief most often sought by employers in instances of breaches of employee confidentiality agreements is an injunction barring the employee from disclosing the information. Going after injunctive relief involves obtaining a court order, and to achieve it, it is necessary to show that the moving party-employer will suffer "irreperable harm" if the promise of non-disclosure continues to be broken. This can be a tough obstacle to overcome, as the employer must prove that no amount of monetary damages would make it whole. To eliminate this hurdle, the employer should draft a provision into the agreement that says that "??any breach of the promise of confidentiality shall result in irreparable harm."??

For the small business owner, confidentiality agreements and non-disclosure agreements, are important methods for protecting trade secrets, customer lists, and other proprietary assets of the company.

by: Ross Zettler

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