Nondisclosure and confidentiality agreement are essentially similar with minimal differences; thus, the terms are very often used interchangeably. The key difference between nondisclosure and confidentiality agreement is that a nondisclosure agreement is a document that shares nonpublic and/or proprietary information with another party whereas a confidentiality agreement is a written legal contract between two or more parties where the involved parties are bound to respect and treat information with confidentiality. Nondisclosure and confidentiality agreements may be one sided (only one party will share information with confidential value) or mutual (all parties will share information with confidential value).
CONTENTS
1. Overview and Key Difference
2. What is a Nondisclosure Agreement
3. What is a Confidentiality Agreement
4. Side by Side Comparison – Nondisclosure vs Confidentiality Agreement
5. Summary
What is a Nondisclosure Agreement?
A nondisclosure agreement is a document that shares nonpublic and/or proprietary information with another party used to safeguard a business’s valuable information. This document is used by a business when it is sharing nonpublic and/or proprietary information with another person or organization.
E.g. In a contract of employment, a clause may be involved where the employee is bound not to disclose the amount of salary to colleagues.
The term nondisclosure agreement is widely used in the USA and this type of agreement is more suitable when there is one-way obligation. Nondisclosure agreements are widely used in following business situations.
- Discussion of a business idea to a potential partner, investor, or distributor
- Sharing financial, marketing, and other information with a prospective buyer of your business
- Showing a new product or technology to a prospective buyer or licensee
- Receiving services from a company or individual who may have access to some sensitive information in providing those services
- Allowing employees access to confidential and proprietary information of your business during the course of their job
Elements of a Nondisclosure Agreement
Following components can be widely seen to be included in nondisclosure agreements.
- Identification of the parties
- Definition of what is deemed to be confidential
- The latitude of the confidentiality obligation by the receiving party
- The exclusions from confidential treatment
- The term of the agreement
What is a Confidentiality Agreement?
A confidentiality agreement is a written legal contract between two or more parties where the involved parties are bound to respect and treat information with confidentiality. This type of agreement includes binding terms and conditions that prohibit the involved parties from disclosing confidential and proprietary information publicly or to another third party.
Confidentiality agreements are used in agreements where highly sensitive information with increased monetary or social value. For instance, all military agreements are highly confidential agreements. Confidentiality agreements are also popular among businesses.
E.g. Honda and Toyota shared information on their hybrid cars in a benchmarking exercise.
Elements of a Confidentiality Agreement
The following elements should be involved in a confidentiality agreement.
- Definition of Confidential Information
- Explanation of Purpose of the agreement
- Type of information parties can and cannot disclose
- Term
- Other Provisions
- Provisions relating to legal enforcements of the contract
- A provision calling for a return of confidential materials after use by the parties
- A provision stating that the agreement is binding on heirs and assigns
- Provisions on how disputes may be resolved if there are any
What is the difference between Nondisclosure and Confidentiality Agreement?
Nondisclosure vs Confidentiality Agreement |
|
| Nondisclosure agreement is a document that shares nonpublic and/or proprietary information with another party. | Confidentiality agreement is a written legal contract between two or more parties where the involved parties are bound to respect and treat information with confidentiality. |
| Terminology | |
| Nondisclosure agreement is a commonly used terminology in the USA. | Confidentiality agreement is a term often used in UK, New Zealand and Australia |
| Nature | |
| Nondisclosure agreement generally contains information of moderate confidential value. | Confidentiality agreements are more suitable when highly sensitive information is involved. |
| Obligation | |
| For agreements where the obligation is one-way, the term nondisclosure agreement is often used. | For an agreement where the obligation is two-way, the term confidentiality agreement is used. |
| Use | |
| Nondisclosure Agreement is more frequently used in third party or startup situations | Confidentiality Agreement is more frequently used in military or in expensive business deals. |
Summary – Nondisclosure vs Confidentiality Agreement
The difference between nondisclosure and confidentiality agreement mainly depends on the situations that they are used for and how the terminology is used in different countries. One sided agreements are often nondisclosure while confidentiality agreements are two-way communication. The components that are included in both types of agreements are largely similar and the focus should be to ensure that all the important terms are adequately and clearly stated in order to ensure a smooth outcome.
Reference:
1. AllBusiness. “The Key Elements Of Non-Disclosure Agreements.” Forbes. Forbes Magazine, 10 Mar. 2016. Web. 24 Apr. 2017.
2. “Non-disclosure agreements.” Non-disclosure agreements – GOV.UK. N.p., n.d. Web. 25 Apr. 2017.
3. “BitLaw.” Confidentiality Agreement (BitLaw). N.p., n.d. Web. 25 Apr. 2017.
4. Emilio, Vanessa, and About Vanessa EmilioVanessa Emilio (BA Hons, LLB, ACIS, AGIA) “Confidentiality Agreement vs Non-Disclosure.” Legal123.com.au. N.p., 21 Jan. 2016. Web. 25 Apr. 2017.
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