A confidentiality agreement or deed is a document which either binds one party (one-way confidentiality agreement or unilateral confidentiality agreement), or all parties (mutual confidentiality agreement, or bilateral confidentiality agreement) to keep confidential certain information of the other party, and to only use that information for limited, defined purposes. The party disclosing the information is commonly referred to as the “disclosing party”, and the party receiving it is referred to as the “receiving party.”

A confidentiality agreement is also known as a non-disclosure agreement, commonly abbreviated to NDA. Sometimes, it is referred to a secrecy agreement, but this is less common.

It is not unusual for a confidentiality agreement to take the form of a deed so as to remove any doubts over the consideration for entry into the obligations. However, depending on the complexity of the matter and the nature of the information to be kept confidential, in limited circumstances, a simpler, letter-form confidentiality arrangement may be acceptable.

Practice Tip: Consider whether any pre contract negotiation confidentiality agreement should be in a deed format due to lack of consideration purposes.

For ease of reference, we will use the term “confidentiality agreement” in this document.

A confidentiality agreement is one of the more common business contracts. Some organisations require employees and contractors to sign such a document before their work relationship commences. Other situations where a business may require a confidentiality agreement include when negotiating a franchising agreement or similar arrangement or transaction where trade secrets or information of a similar nature would be disclosed by one party to another.

Practice Tip: Consider whether a preliminary confidentiality agreement is required to protect information that may be dis-closed during negotiations.

It is critical that the purpose of use of the information is clearly set out, as it is possible for a receiving party to maintain confidentiality of information but still use that information for a purpose that is adverse to the interests of the disclosing party.

While equity will impose obligations of confidence in circumstances where confidential information is disclosed in confidence, it is prudent to confirm confidentiality obligations (preferably under a deed) for the following reasons:

• The existence of the document puts it beyond doubt that the information is agreed by the parties to be confidential and is disclosed in circumstances of confidence.

• The contractual terms can create obligations that the law of equity will not ordinarily impose, for example, including provisions dealing with the process to be followed when disclosure is compelled.

The remedies for a breach of the confidentiality agreement should be set out in the document. When considering what remedies should be included, factors such as the effect of the intentional or unintentional release of the confidential information would have on the disclosing party and whether financial compensation is sufficient are relevant.

For general guidance in relation to drafting confidentiality agreements, see General drafting issues.

For guidance in relation to one-way confidentiality agreements as well as an example precedent, see One-way confidentiality agreement.

For guidance in relation to mutual confidentiality agreements as well as an example precedent, see Mutual confidentiality agreement.