Information can be your most valuable business asset – from new products and trade secrets, to financial performance and details about your customers. It’s important to safeguard confidential information, to protect your business and your advantage over competitors.
At some point in your export growth, you’ll probably need to share sensitive information with people outside your business – such as banks and finance providers, suppliers, or distributors.
When you share any sensitive or confidential information with third parties, it’s vital to protect it from unauthorised use or disclosure that could harm your business.
Why use a confidentiality agreement?
A written confidentiality agreement (or non-disclosure agreement) is the best way to make sure that sensitive or commercial information you share with a third party will be legally protected.
Using confidentiality agreements has several benefits:
- they create a simple contractual obligation not to use or disclose the specified information, which can be enforced as a breach of contract
- they give the recipient certainty about the behaviour that you expect
- since confidentiality agreements are a contract, it’s easier to enforce a breach of contract than a breach of the duty of confidence
- you can tailor them to fit your situation - for example, to allow disclosure to professional advisors
- they allow you and the recipient to agree the laws that will govern the disclosure and how disputes will be resolved
- they give the recipient a strong psychological barrier against using or disclosing the specified information.
On this page, 'confidentiality agreement' is used to describe both deeds and agreements. In general, you should use an agreement if both parties are disclosing confidential information – your lawyer or legal advisor can confirm what you need.
What to include in confidentiality agreements
At a minimum, a confidentiality agreement should include:
- an accurate, comprehensive description of the confidential information being disclosed
- an obligation to keep the information confidential, and to only use it for the specific purpose described in the agreement
- details on the limited circumstances in which the recipient is permitted to use or disclose the information
- the duration of the confidentiality obligation (if in doubt, it’s generally preferable to require confidentiality until the information enters the public domain)
- details on which country’s laws will govern the agreement.
Take a look at the sample mutual / reciprocal confidentiality agreement on the right hand side of this page. This is an example only - before signing any confidentiality agreement, you should always seek legal advice to ensure the agreement is tailored to fit your specific business requirements.
The limits of confidentiality agreements
Although confidentiality agreements have some important advantages, there are some practical limits to what they can do.
- If the protected information is disclosed, it can be hard to prove that it was the recipient who did so.
- Legal injunctions to prevent disclosure are of little use if the information has already been disclosed to other parties.
- Any damages you’re awarded after a breach won’t prevent the spread of the information.
What happens without a confidentiality agreement?
If sensitive business information is shared without a contract that restricts the disclosure of information, there may be a duty of confidence from the person who receives the information (the recipient) towards the business that disclosed it.
If a recipient uses or discloses sensitive information without your permission, you may be able to enforce the duty of confidence through the courts, if you can prove that:
- the information was of a confidential nature (that is, it wasn’t publicly available)
- you shared the information with the recipient on the understanding that it was confidential and was to be kept confidential
- there was an unauthorised use of your information, to the detriment of your business.
If you successfully enforce the duty of confidence, you may be entitled to damages to compensate for any loss the breach has caused. If the information hasn’t yet been disclosed, you may be entitled to an injunction to prevent disclosure.
It’s very risky to depend on the duty of confidence to protect your confidential information. Breaches can be difficult to prove, the court process is often slow and expensive, and even if you’re successful in court much of the damage may have already been done.
Try to agree the terms on which the recipient can use any sensitive information before you disclose it.
Practical ways to protect sensitive information
Confidentiality agreements are a great start to legally protect your sensitive information. You can also take practical steps to protect this information in your day-to-day business.
- Only disclose confidential information to people who need to know it.
- Make sure that each recipient is under an obligation of confidence owed directly to your business.
- Set a requirement that all confidential information must be destroyed or returned to your business once it’s no longer needed.
- Keep accurate and up-to-date records of exactly what information has been disclosed, and to whom
- Mark all sensitive commercial information as 'confidential' prior to release.