What is a Confidentiality Agreement?

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  • Written By: wiseGEEK Writer
  • Edited By: O. Wallace
  • Last Modified Date: 15 February 2020
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The confidentiality agreement may be known by many different names. One of the most used of these is non-disclosure agreement or NDA. These are, when drawn appropriately, a legal agreement between two or more parties, specifying what aspects of contact between these parties cannot be discussed in public or disclosed to anyone else without permission.

Such agreements can be entered into for a number of reasons. Highly public people, like celebrities may request their employees not to reveal information about them. Sometimes companies engage in private, proprietary or classified work, that they do not want employees to disclose. Alternately, a company could be in development of a particular idea they need to keep secured from competitors, and would ask employees to sign a confidentiality agreement. Perhaps the most common use of these agreements though, is to allow for conversations between two companies that might do business together, where it is necessary to discuss proprietary information or details about one or both businesses.

The terms of a confidentiality agreement may be time limited. For instance, businesses might require privacy for a year, five years, or ten. There may be a statement in the agreement about consequences if the agreement is violated, which include demand of payment of pre-specified amounts, loss of jobs or voiding of any future contracts.


Exactly what must be kept private is usually defined too, and definitions may be broad or narrow depending on the specific agreement. Another commonly used element in a confidentiality agreement is statements about when privacy is not considered breached, like after a certain time, or when information is already public. Until the confidentiality agreement is signed, for example, anything that may have been said, confessed or presented is usually not confidential, and often can’t be retroactively turned into confidential material.

One last part that may particularly occur in agreements between businesses is a statement about who owns the confidential material. This is used frequently because the last thing a business would want is to have another business steal an idea and profit from it. When this statement of ownership is present, it would be harder for this scenario to occur. All profit from an idea or plans for something would then accrue to the company who owned that information, regardless of who developed it.

There are other less formal types of the confidentiality agreement. Medical patients for instance have a presumption of confidentiality, and in the US must give signed permission about privacy, including signing permission for a doctor to discuss any medical information with an insurance company. There are usually defined times when a doctor can violate a patient’s privacy, called doctor/patient privilege, and these are only in instances when the person has a disease that must be reported to a state agency, or if the person is a risk to himself or others. In a doctor’s office or hospital there are lots of workers who aren’t doctors, and it might be wondered if patient confidentiality still holds.

It’s very clear that material meant to be kept confidential is not always kept so. This would suggest that those considering entering a confidentiality agreement to disclose any private, secret or proprietary information think about the matter and the trustworthiness of the party with whom they plan to create this contract. If mistrust exists, even a signed agreement, though it could create a pathway for a lawsuit, may not be an adequate shield.


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