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What is a Confidentiality Agreement?
A Confidentiality Agreement is a legal document between two parties that prevents the release of information, ideas, transaction details, and more to third parties.
Businesses commonly use these agreements during interactions with potential purchasers, clients, or hires to ensure confidential or proprietary information isn’t misused to the detriment of the owner. Instead, the document outlines the permitted uses of the information in question. It also acts as evidence of an agreement in court if the recipient breaches the contract.
A Confidentiality Agreement is also known as the following:
- Non-disclosure agreement (NDA)
- Confidential disclosure agreement
- Proprietary information agreement
- Secrecy agreement
Who are the parties in a Confidentiality Agreement?
A Confidentiality Agreement has two parties:
- Information Provider: discloses sensitive information for a specified purpose.
- Information Recipient: signs the Confidentiality Agreement, receives the information, and promises not to release or misuse the information.
When should I sign a Confidentiality Agreement?
A request to sign an agreement shouldn’t be taken personally. Think of the document as a substitute for trust. If an individual or business doesn’t know you, a Confidentiality Agreement is an easy way to ensure you don’t share sensitive information with competitors while building trust.
You should sign a Confidentiality Agreement when it’s necessary to protect confidential information, inventions, ideas, or artist creations during discussions, proposals, and negotiations. Common scenarios include when:
- An employer wishes to protect company information while negotiating a position with a potential new hire or giving new responsibilities to an existing employee.
- A client wishes to keep their company or personal information private when hiring an independent contractor or consultant.
- During a pending company acquisition, the seller wishes to keep the proposed terms of the agreement and company information private (e.g., the research or "due diligence" phase).
- Two or more businesses wish to begin working together, and want to keep negotiations private (e.g., a joint venture, merger, partnership, etc.).
If you’re an employer hiring new employees, a more detailed Employment Contract can better outline confidentiality regulations between an employer and employee.
Information is not confidential when:
- It's already known in the industry
- It becomes publicly known, through no fault of the recipient
- It's already rightfully in the recipient’s possession
- Created by the recipient through independent research
- Rightfully disclosed and obtained from a third party
Can a Confidentiality Agreement last forever in India?
The obligations created by Confidentiality Agreements in India typically last between two and five years, but some obligations can last indefinitely.
It’s common for Confidentiality Agreements to extend beyond the duration of a business relationship if the sharing of trade secrets took place. Trade secrets can include methods, recipes, techniques, etc.
Confidentiality laws in India are governed by The Indian Contract Act, 1872.
How does someone breach a Confidentiality Agreement?
The recipient will be in breach of their obligations under a Confidentiality Agreement if they mishandle, misuse, release, or otherwise use the disclosed confidential information other than for the purpose specified in the document.
Dishonest use of someone’s confidential information can also amount to a criminal breach of trust under Section 405 of India’s Penal Code.
How do I create a Confidentiality Agreement in India?
Use LawDepot's Confidentiality Agreement template to create a unique contract for your situation. Simply answer the questions in our online form to generate a document that you can download, print, and sign. The steps to completing the form are as follows:
1. Provide party details
The details of your Confidentiality Agreement will vary depending on the relationship between the information provider and the recipient. As such, it's important to describe the parties to the contract, including their names, addresses, and relationship with each other. For example, Confidentiality Agreements are common between:
- Employers and their employees
- Clients and independent contractors
- Buyers and sellers of assets or businesses
- Product inventors and evaluators
If the agreement involves businesses, you can use the company name in place of an individual's name. Also, if the contract is between a buyer and seller, state whether the sale is of a business, company shares, or another asset.
Likewise, if the recipient of the confidential information is an employee or a contractor, you can include their job title and description. This helps makes clear why the individual has access to sensitive information.
A Confidentiality Agreement protects the disclosure of various types of information, such as:
- Accounting information: accounting procedures, payroll, software, reports, etc
- Business operations: employer and employee personnel data and any internal cost information and operational procedures
- Customer information: client lists, contracts, and business relationships
- Intellectual property: patents, trade secrets, proprietary software, copyrights, test data, computer technology, and scientific information
- Marketing information: campaigns, projects, and more
- Product and service information: procedures, packaging, equipment, and production techniques
- Proprietary computer technology: any information relating to unique computer applications, tools, or systems
3. State the parties’ location
States and territories in India may have different rules and regulations on confidentiality. Select the state or territory where your business will take place, and we’ll tailor your Confidentiality Agreement to meet the laws of your location.
You can use LawDepot’s Confidentiality Agreement template in:
- Andaman and Nicobar Islands
- Andhra Pradesh
- Arunachal Pradesh
- Assam
- Bihar
- Chandigarh
- Chhattisgarh
- Dadra and Nagar Haveli
- Dadra and Nagar Haveli and Daman and Diu
- Daman and Diu
- Goa
- Gujarat
- Haryana
- Himachal Pradesh
- Jammu and Kashmir
- Jharkhand
- Karnataka
- Kerala
- Ladakh
- Lakshadweep
- Madhya Pradesh
- Maharashtra
- Manipur
- Meghalaya
- Mizoram
- Nagaland
- National Capital Territory of Delhi
- Odisha
- Puducherry
- Punjab
- Rajasthan
- Sikkim
- Tamil Nadu
- Telangana
- Tripura
- Uttar Pradesh
- Uttarakhand
- West Bengal
If you selected the “other” type of agreement at the beginning of the questionnaire, describe in your own words how the recipient is permitted to use the confidential information.
Use specific wording if the recipient can only use the information for a particular purpose. Use general language for more general purposes.
5. Outline the terms of the agreement
State whether the Confidentiality Agreement will end on a specific date or continue indefinitely. Also, include whether there are non-compete or non-solicit clauses and when they end.
What is a non-compete clause?
A non-compete clause restricts the recipient from starting a competing company or disclosing confidential information to competitors. However, it’s important to note that it can’t prevent people from working for competitors.
Note that a non-compete clause will likely be unenforceable under the Indian Contract Act, 1872, unless it’s fair and reasonable, both in terms of the business endeavour it affects and the period it covers.
What is a non-solicit clause?
Non-solicitation clauses are often included in Confidentiality Agreements among businesses during early discussions regarding transactions. This clause restricts the purchaser from hiring the employees of the seller.
Most non-solicit clauses last one or two years, but they can extend for longer periods as well. However, it’s important to note that a court may not uphold this clause if it deems the length of time unreasonably long for the particular situation.
6. Include any additional clauses
If there are any terms or conditions unique to your situation that LawDepot's Confidentiality Agreement template doesn't address, you can include them here.
7. Outline the signing details
State when the parties will sign the Confidentiality Agreement and if witnesses will be present.
Having a witness present for the signing helps reinforce the validity of the signatures on the contract. The witness can verify the identity of the signers and attest to their willingness to enter the agreement.
Your Confidentiality Agreement doesn’t require stamp paper to be legally valid. However, non-judicial stamp paper increases the likelihood of a court viewing the contract as legitimate and enforceable.