Last updated: March 12, 2024
Written by
Kyle Adam Kyle Adam, BComm
Kyle Adam is a seasoned content creator, editor, and SEO specialist with over four years of experience. Presently, he serves as Senior Marketing Writer and Editor at LawDepot. Holding a...
Reviewed by
Alan Collins Alan Collins, BCL
Alan Collins is a Legal Writer and Custodian of Records for LawDepot and a member of the Alberta Law Society. Interests in literature, language and history are what prompted him to stud...
|
Fact checked by
Rebecca Koehn Rebecca Koehn, BSc, MFA
Rebecca Koehn has been working in content creation and editing for over ten years and search engine optimization for over five years. Koehn is the Content Marketing Manager for LawDepot...
What is a Confidentiality Agreement?
A Confidentiality Agreement is a legal contract that protects sensitive information from unauthorised disclosure. This type of agreement is commonly used by companies to protect their intellectual property, business operations, customer information, and more.
When executed properly and all legal requirements are met, Confidentiality Agreements bind recipients of sensitive information to their obligation of non-disclosure.
Our Confidentiality Agreement template is unilateral, meaning an information provider discloses confidential information to a recipient. A mutual Confidentiality Agreement, also known as bilateral, means that both parties are disclosing and receiving confidential information. If you need mutual protection, create one document in which you are the information provider and another in which you are the receiver.
A Confidentiality Agreement is also called a:
Who should use Confidentiality Agreements?
Many different types of individuals and organisations can use Confidentiality Agreements, including:
- Companies, partnerships, and sole proprietors disclosing information to employees, contractors, and consultants
- Business owners who need to disclose sensitive information to potential buyers while selling a company or business
- Entrepreneurs, companies, or inventors disclosing information to potential investors, lenders, or collaborators.
What is the purpose of a Confidentiality Agreement?
A Confidentiality Agreement records a recipient's obligation of confidentiality. As an information provider, Confidentiality Agreements give you a cause of action if the information is disclosed or misused. Having a signed Confidentiality Agreement in place ensures all parties are aware of the obligations being created and provides evidence of the agreement should you need to rely on it.
Confidentiality Agreements provide clarity by clearly defining the confidential information. If someone is going to have access to lots of information, but only some of it is confidential, a Confidentiality Agreement defines what information is actually confidential. In addition, an agreement outlines the acceptable uses of confidential information, so there is no confusion. This is important because there is always a reason for the disclosure.
Confidentiality Agreements can protect organisations legally. Organisations in Singapore are subject to the Personal Data Protection Act 2012 (PDPA) which governs the collection, use and disclosure of personal data. Under PDPA, organisations are obliged to keep the personal information they collect secure. Confidentiality Agreements can help organisations fulfil their PDPA obligations when staff have access to users’ personal data.
A Confidentiality Agreement can be used to protect a variety of information, such as:
- Customer information, such as customers’ banking information and contact details
- Intellectual property, such as trade secrets, recipes, or the plans for an invention
- Marketing information, such as marketing plans or techniques
- Business operations, such as client lists, business strategies, and information about personnel and vendors
- Product information, such as product specifications, manufacturing processes, and variable costs
- Service information, such as plans, schedules, manpower, inspection, and training information.
- Proprietary computer technology, such as information or software regarding a machine, appliance or process.
- Accounting information, such as financial statements, annual reports, balance sheets, company asset information, accounts receivable, and more.
Certain types of information cannot be protected by a Confidentiality Agreement because they are not confidential in nature. Confidential information does not include:
- Information that is already known in the industry
- Information that becomes publicly known through no fault of the recipient
- Information already rightfully in the possession of the recipient
- Information created by the recipient through the recipient's own independent research
- Information rightfully disclosed and obtained from a third party
How long should a Confidentiality Agreement last?
The appropriate duration of a Confidentiality Agreement will depend on your circumstances. There are two options for determining the length of a Confidentiality Agreement.
First, you can specify a date for the duty of confidentiality to end. Once that date has passed, the information in the Confidentiality Agreement could be freely used or shared by the recipient. If it is anticipated that the information will not be confidential after a certain date, it is appropriate to put a time limit on the obligations of confidentiality. For example, obligations might end after a product launch, after which details of the product would be in the public sphere.
In contrast, the duty of confidentiality can last indefinitely. In an employment situation, the employee’s obligations of confidentiality are likely to be perpetual because they may have access to their employer’s trade secrets, a category of confidential information which must always be kept confidential because they are key to a company’s profitability and edge over competitors. Therefore, an employee who agreed to keep a company's trade secret may be expected to keep that secret even after they have stopped working for the company.
What is a non-solicitation clause in a Confidentiality Agreement?
In a Confidentiality Agreement, a non-solicitation clause prohibits the recipient from hiring the employees and contractors of the information provider.
Suppose you hire a new employee and they sign a Confidentiality Agreement containing a non-solicitation clause. When they quit, the non-solicitation clause prevents them from leveraging insider knowledge to poach your other employees or contractors to work for them.
It is important to note that a court may not uphold this clause if the time period is unreasonably long. What makes solicitation of this kind unfair is that it typically makes use of information gained while working with the employer or information owner. As time passes such information becomes less critical in soliciting a worker and must be balanced with the need for fair market competition.
What is a non-competition clause in a Confidentiality Agreement?
In a Confidentiality Agreement, a non-competition clause prohibits the recipient from starting a business that is in direct competition with the information provider.
The law may uphold such a clause because otherwise, the new business could use insider knowledge to gain an unfair advantage over the competition. A non-competition clause also prohibits the recipient from revealing confidential information to the information provider’s competition.
It’s important to note that a non-competition clause cannot prevent someone from working for competitors.
Are Confidentiality Agreements enforceable?
A Confidentiality Agreement can be legally enforceable. Keep in mind that it is ultimately up to a court to decide whether or not a Confidentiality Agreement can be enforced. The Singapore courts will consider a variety of factors and use legal tests in determining whether a Confidentiality Agreement will be enforceable, including:
- Whether the contract meets all legal requirements (in other words, whether the document has been properly executed and there is adequate consideration)
- Whether the information shared possesses the necessary quality of confidence (evidence of steps taken to preserve the secrecy of the information may be needed to meet this requirement)
- Whether the contract’s terms unfairly restrict the recipient with excessive time frames or burdens
- Whether the confidentiality of the information is against the public’s best interests
- Whether the sensitive information referenced in the Confidentiality Agreement is already public knowledge
What happens if you break a Confidentiality Agreement?
When a recipient of information breaks their Confidentiality Agreement and shares or misuses the information it is known as a breach of contract. The information provider’s remedies for breach of contract may include:
- Injunctive relief: An injunction is a court order that would require the recipient to refrain from spreading or misusing the information. Injunctions are very time-sensitive and will only be an effective remedy if the information has not already been made public.
- Damages: Damages aim to put the information provider in the position they would have been in had the breach of contract not occurred by putting a monetary value on the loss caused by the breach.