What Is a Confidentiality Statement?

by Tom Streissguth; Updated September 26, 2017
at the meeting

Meetings and networking are the lifeblood of business, but they also provide the opportunity for disclosure of vital information. With the use of a confidentiality agreement, the parties can keep nonpublic information under wraps. These contracts bind the parties to very specific pledges on the disclosure of information, and are enforceable under the laws of the state where they are created.

Uses

There are several different uses for a confidentiality or nondisclosure agreement. An individual with a patentable invention or idea may need to partner with a manufacturer or marketing firm; he may also want to keep his potential blockbuster product a secret. A business may not want their employees disclosing trade secrets, or the company's financial info. Two companies considering a joint venture may need to share the names of their investors -- but may not want those names to reach competitors' eyes and ears. Confidentiality agreements can cover all these scenarios; the parties can tailor them to their specific needs before a meeting or negotiation, or over the course of a contractual relationship.

Agreement Specifics

A unilateral confidentiality agreement is used when only one party is disclosing information; mutual agreements cover disclosures by both or all parties. The agreement can only cover nonpublic information; it can't cover public financial data, for example, or designs that have been granted patents and thus are a matter of public record. To be effective, a confidentiality agreement should specify the information that is to be kept confidential; this can include business practices, schematic drawings, client lists, vendor information or sales data. The agreement can put a deadline on the nondisclosure of information and include a clause that voids the agreement under certain conditions, such as litigation between the parties.

Invalid Restrictions

Under certain circumstances, a court of law would not hold a party to a confidentiality agreement liable for disclosing information. If a receiver of information had prior knowledge of the information, for example, or received the information from another source, and that earlier disclosure was not subject to a confidentiality agreement, then he would not be held responsible for a disclosure. Also, a court order or subpoena for documents or information would in most cases trump a confidentiality agreement, although a judge can also take steps to prevent public disclosure of sensitive information. In addition, law enforcement has certain enforceable rights to information -- whether or not it's subject to a confidentiality agreement -- during a criminal investigation.

Violations

A confidentiality agreement is an enforceable contract as long as it conforms to state laws. If a receiver of information violates the agreement, then the party that disclosed the information can file a civil lawsuit for monetary damages as well as injunctive relief -- an order from the court to "cease and desist" any further disclosure, and for any party that has access to the information to stop all production, sales or other exploitation of the information. A confidentiality agreement is a frequent part of settlements; if a plaintiff in a personal injury lawsuit discloses terms of a settlement, for example, the defendant can sue for damages and breach of contract.

About the Author

Founder/president of the innovative reference publisher The Archive LLC, Tom Streissguth has been a self-employed business owner, independent bookseller and freelance author in the school/library market. Holding a bachelor's degree from Yale, Streissguth has published more than 100 works of history, biography, current affairs and geography for young readers.

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