One of the first considerations with any type of new venture is how to protect your business, valuable idea or concept if you need to disclose it to others.

When is a confidentiality agreement needed?

If you need to disclose your valuable business information or ideas to a potential partner, adviser or investor then a confidentiality agreement is an essential tool.

What is a confidentiality agreement?

A "Confidentiality Agreement" or a "Non-Disclosure Agreement" is a legally binding contract which contains promises from the recipient of the confidential information to limit the use of the information to a specific purpose.

Confidentiality agreement tips

1. A confidentiality agreement must do three things:

  • define what information is "confidential information"
  • identify the specific purpose the for which information will be supplied
  • restrict its disclosure and identify any permissible disclosures.

2. The following statements should be included (if applicable):

  • disclosure is not intended to transfer any rights in such information
  • there is no exclusivity granted to the recipient in the confidential information
  • there is no obligation on the discloser to provide confidential information
  • the supply of confidential information does not constitute an offer of any kind
  • no warranty is given about the accuracy or completeness of the information

3. The following obligations should be imposed on the recipient:

  • the recipient must keep the information confidential
  • the recipient is responsible for any unauthorised disclosure
  • the recipient acknowledges that breach of the agreement may cause loss to the discloser
  • the recipient indemnifies the discloser for any loss arising from the recipient's breach of the agreement
  • the recipient must return all confidential information on demand
  • the recipient agrees not to solicit or approach employees, customers or suppliers of the discloser or interfere with its business.

4. Other common terms which should be included:

  • the term of the agreement – how long the agreement should be in force
  • governing law and jurisdiction – the laws of which state or country should apply.

Swaab was recently named a 2009 Winner in the ALB Employer of Choice awards, and was winner 'Best Law Firm in Australia (Revenue < $20m)' and 'Attribute Award for Exceptional Service (Australia Wide)' in the 2008 BRW- Client Choice Awards.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.