Free Confidentiality Agreement

A Confidentiality Agreement is an agreement under which a party ("Recipient") agrees to maintain confidentiality regarding proprietary information ( "Confidential Information") that it receives from another party ("Information Owner"). This type of agreement may be useful in a variety of circumstances. For example, two companies might choose to share information for the purpose of determining whether the company with marketing expertise could help a manufacturing company better market its products. In such a situation, the manufacturing company would probably be sharing product and customer information with the marketing company and would want to protect this information from disclosure by the marketing company to third parties.

The Confidentiality Agreement should state the relationship between the parties. For example, "the Information Owner is engaged in the business of manufacturing computer widgets. Recipient is a marketing firm that specializes in marketing computer products. Information will be disclosed to Recipient to enable the parties to determine whether Recipient could assist Information Owner with the development of a marketing plan."

The Confidentiality Agreement should be signed by both parties and becomes effective as of the date specified in the Agreement.

Unilateral vs. Mutual Nondisclosure Agreements
Using Non Disclosure Agreement Forms
Protecting Your Confidential Business Information
Important Facts About Non Disclosure Agreements
What to Include in an Employment Agreement

A Confidentiality Agreement should include provisions that (i) require amendments (changes) to the agreement to be in writing and signed by both parties, (ii) specify the state whose laws will govern and interpret disputes between the parties regarding the matters covered by the agreement, and (iii) prohibit the parties from assigning their obligations under the agreement to third parties. Generally, the state whose laws should govern the agreement should be the state of the Information Owner or the Recipient.

Generally, the Information Owner and the Recipient intend that the Confidential Information will only be used by the Recipient for the limited purpose of reviewing the information and becoming familiar with the Information Owner's business to determine whether the parties might have interest in future transactions (based on some additional agreement). A "limited license" provision makes it clear that the Recipient is not acquiring the right to use the Confidential Information on a general basis.

A Confidentiality Agreement's purpose is to provide protection to the Information Owner. It is not intended to create a business relationship between the Information Owner and the Recipient, or to imply that either party will be obligated to do business with the other. To avoid that possible implication, it is common to include a "no obligation" paragraph that specifies the parties' intentions to not become obligated to each other.

There is a possibility that the Confidential Information could contain mistakes or errors, or be based on assumptions that later prove to be incorrect. Therefore, it is common for Information Owners to include a "no warranty" provision that specifies that the Information Owner will not be responsible for any damages that the Recipient might incur from using the Confidential Information.

Risk of Disclosure
In addition to the "No Warranty" provision, the Protected Party may also want to provide that any disclosure made by the Recipient of any information is at the Recipient's risk. Because the Protected Party has already stated that it will not warrant the accuracy of the information, the Protected Party can further provide that the Recipient will bear the risk of using the information in violation of the agreement. For example, if the Recipient acts on some of the information and the information was inaccurate, the Recipient cannot hold the Protected Party responsible for the harm caused by the inaccurate information.

The Recipient agrees to protect the Confidential Information. Sometimes this protection is enhanced by limiting the Recipient's authority to make copies, permitting the Recipient to disclose the information only to the Recipient's employees who have an important reason for needing to know the information, and by allowing the Information Owner to obtain an injunction if it appears that the Recipient may disclose the information.

The Confidentiality Agreement should state the relationship between the parties. For example, information could be provided as follows:

• The Owner is "engaged in the business of selling computer software and related products."

• The Recipient is "a marketing firm that specializes in marketing computer products."

• Information will be disclosed to the Recipient to enable the parties to determine whether the Recipient could assist the Owner with the development of a marketing plan.

The Information Owner can also attempt to further protect the Confidential Information from disclosure by requiring that any written materials be returned upon request.

1. The Confidentiality Agreement should be signed by both parties and becomes effective as of the date specified in the Agreement. It is not necessary that the signatures be witnessed or notarized.

2. It is advisable to sign two copies of the Agreement so that each party will have a copy with original signatures. Original copies should be kept in a fire-proof and safe location.

3. A lawyer should be consulted regarding any issues not addressed by this program.

4. It is helpful for both parties if the Information Owner clearly marks all pages of all documents as "Confidential" before releasing such information to the Recipient. In addition, the Information Owner may wish to maintain a list of all documents provided to the Recipient and/or make a copy of all such documents.