Confidentiality Agreements

Pause and think about what you are getting into

A confidentiality agreement (also referred to as a “non disclosure agreement” or “NDA”) is a contract where parties agree not to disclose information covered by the agreement, typically used to protect non-public business information such as trade secrets/commercially sensitive information.

Should I just get on with it and sign it?

The answer is no! We recommend you should pause and consider what’s involved:

Who are the parties? Don’t just focus on who the proposed parties are, think about who they should be. Who will have access to the confidential information and what might they do with it. Also when entering party details you should always ensure the correct legal names have been used so there is no problem if you try to enforce your rights.

Does the confidentiality agreement offer protection to one party or both? Check the terms of your agreement, sometimes these agreements are mutual (both parties’ confidential information is protected) or one way (one parties confidential information is protected).

Who will receive the confidential information and what could they do with it? It’s all well and good to have an agreement with a company, but the company is made up of individual employees and will often have other companies (and individual employees) in its group or advising it. Consider if any subsidiary or related parties should be a party to the agreement.

How deep are their pockets? Has a new company been set up just for this particular project, that could be wound up if they don’t get the work? Perhaps a personal guarantee of the confidentiality agreement is appropriate. In the case of a one-way agreement with a large corporate with deep pockets, you should take the terms very seriously.

Is there a no-competition clause? Sometimes these agreements specify that the confidential information must not be used in any way which is detrimental to or in competition with the discloser.

Security of Information: check these clauses the options may include an absolute obligation to keep the information secure and confidential, or lesser levels of best endeavors or all reasonable endeavours. Often this depends to a large extent on the nature and volume of the confidential information.

At the end of the day: in practice many people will sign these documents without much thought or care because it’s the price of getting access to the information and they know that they are very difficult to enforce in practice. The best practical steps you can take are to think very carefully about what you disclose, what you receive, and when. If something is particularly sensitive, consider holding it back until later when you can disclose it on more protective terms.

And if in doubt, please reach out to Claire Gibson to review your confidentiality agreement – claire@foundationlegal.co.nz or 021 715 325.