What is a Confidentiality Agreement?
A Confidentiality Agreement is a legal document that helps protect private or sensitive business information. It can cover business plans, financial information, customer data, intellectual property, trade secrets, and operational details.
The disclosing party shares confidential information with the receiving party for a defined permitted purpose, who agrees to protect it and use it only for that purpose.
A Confidentiality Agreement can define the information covered, explain how it may be used or disclosed, and set out each party’s responsibilities if there is a breach.
Unilateral vs. bilateral Confidentiality Agreements
There are two main types of Confidentiality Agreements:
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Unilateral (one-way) agreement: One party shares confidential information, while the other party agrees to protect it. For example, an employer may share non-public business information with an employee.
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Bilateral (two-way) agreement: Both parties share confidential information and agree to protect each other’s information. These agreements are often used when parties are exploring a joint venture or partnership.
LawDepot’s Confidentiality Agreement is unilateral. If both parties need to share confidential information, you can create a second, reciprocal agreement with the parties' roles reversed.
Confidentiality Agreement vs. Non-Disclosure Agreement (NDA)
Confidentiality Agreements and Non-Disclosure Agreements both help protect sensitive information from unauthorized use or disclosure.
If you wish, you can style your agreement as a Non-Disclosure Agreement instead using LawDepot's Non-Disclosure Agreement product.
Key components of a Confidentiality Agreement
The key parts of a Confidentiality Agreement include:
Definition of confidential information
Agreements define the information that must remain confidential, such as:
- Business plans
- Financial data
- Trade secrets
- Technical materials
- Customer information
An agreement can also clarify what information isn’t confidential if required.
Confidentiality obligations
Agreements set out how the receiving party may use and protect confidential information. It can also address disclosures required by law or a court order.
Timeline
Terms for Confidentiality Agreements outline when confidentiality begins and how long it lasts.
The agreement may also require confidential materials to be returned or destroyed when the arrangement ends.
Parties
The agreement identifies the parties and their roles, for example:
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An employer sharing non-public business information with an existing employee who is taking on a new role
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A client sharing sensitive information with an independent contractor providing a service
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A business owner disclosing confidential financial and business information to a potential buyer of that business
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An inventor needing to share their ideas with evaluators to get their project to the next step
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A business sharing marketing strategies with a prospective new partner
What information can I use a Confidentiality Agreement for?
Disclosing parties can use a Confidentiality Agreement to protect sensitive business information shared with receiving parties.
Client information
Client and customer information can be confidential business information. It may include client lists, contact details, account information, project details, service requirements, and non-public communications.
If this information includes personal employee information, employers must also comply with applicable privacy laws.
Trade secrets and intellectual property
Trade secrets may include confidential formulas, processes, methods, technical knowledge, or other information that gives a business a competitive advantage by remaining secret.
Intellectual property can also include intangible assets such as copyrights, trademarks, and patents.
Canada does not have one trade secret law that applies to every business. Trade secrets may be protected through confidentiality agreements and legal duties of confidence. The Canadian Intellectual Property Office recommends taking reasonable steps to keep valuable business information confidential.
Marketing plans
Marketing plans may include upcoming campaigns, target audiences, pricing strategies, product launches, and advertising materials that are not yet public, and could be damaging in the hands of competitors.
Business strategies
Business strategies may include financial information, growth plans, internal processes, supplier arrangements, operational data, and other non-public commercial information.
For employers, a Confidentiality Agreement does not replace an employer’s privacy obligations when collecting, using, or disclosing an employee’s personal information. These obligations are typically addressed through workplace privacy policies and applicable privacy legislation.
What laws govern Confidentiality Agreements in Canada?
Confidentiality Agreements are generally governed by the contract law of the province or territory named in the agreement. In Quebec, contracts are governed by the Civil Code of Québec.
Other laws may apply, depending on the type of information involved:
Trade secrets
Canada has no single trade secret law that applies to all businesses. Protection may come from contract law (such as a Confidentiality Agreement) or, failing that, the common-law duty of confidence (which holds that an obligation to maintain confidentiality exists even without a contract when a person knows, or should know, that information received was secret).
The CIPO trade secret guidance recommends taking reasonable steps to keep trade secrets confidential.
Personal information
PIPEDA (the federal private-sector privacy law) may apply when personal information is shared during a business transaction.
The due diligence phase of a business acquisition involves the prospective purchaser examining the business records of the target company to assess its value and those records the personal information of individuals, such as employees.
Under PIPEDA section 7.2, such information can be disclosed without the knowledge or consent of such individuals as long as the parties have an agreement that limits the recipient’s use and disclosure of the information, requires safeguards, and requires its return or destruction if the transaction does not proceed.
Please note: A Confidentiality Agreement does not replace privacy obligations under applicable federal, provincial, or territorial law but it can create additional obligations and set out appropriate legal remedies for breach of confidentiality.
What is considered confidential information in Canada?
In Canada, there is no single legal definition of confidential information. Generally, it is non-public information shared with the expectation that the recipient will keep it private.
Courts may consider whether the information was confidential, shared in circumstances creating an obligation of confidence, and used or disclosed without permission.
In Lac Minerals Ltd. v. International Corona Resources Ltd., Corona shared confidential geological data with Lac Minerals during merger discussions. Lac later used that information to acquire land Corona intended to buy. The Supreme Court of Canada found that Lac had breached its obligation of confidence.
Trade secrets have value because they are not publicly known. The CIPO trade secret guidance notes that businesses should take reasonable steps to protect trade secrets. A Confidentiality Agreement is one measure businesses can use to help protect confidential information.
Key benefits of using a Confidentiality Agreement
When you share sensitive information using a Confidentiality Agreement, it can help you:
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Set clear expectations for how the receiving party may use and share the information.
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Limit use of the information to an agreed purpose, such as evaluating a partnership or completing a project.
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Create a written record of each party’s confidentiality responsibilities.
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Support efforts to protect trade secrets and other non-public information.
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Help parties handle personal information carefully when privacy laws apply.
A Confidentiality Agreement may help protect sensitive information, but its effect depends on its terms, the circumstances, and applicable law.
Consider seeking legal advice for agreements involving more complex business, intellectual property, or privacy risks.
How to create a Confidentiality Agreement
You can create a Confidentiality Agreement with LawDepot by completing a guided questionnaire with easy-to-understand steps:
Step 1: Specify roles and relationships
Determine the relationship between the parties, such as seller/buyer, client/contractor, or inventor/evaluator, as this will determine the type of agreement your document reflects.
Step 2: Provide confidentiality details
Specify which types of information need protection. This can be all shared information or specific details, such as customer data, intellectual property, or business operations.
Step 3: Input key party information
Provide the location and contact information for the parties. LawDepot uses the selected province or territory to customize your Confidentiality Agreement for the applicable jurisdiction.
The details you'll need to provide for each party will depend on the agreement type. For example, if the agreement is for an employer and employee you'll include:
Step 4: Set agreement terms
Choose the terms that will apply to the agreement, including how long the confidentiality obligations will last (i.e., indefinitely, a set number of years, or until a specific date).
You may also have the option to include restrictive clauses, such as:
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Non-compete clause: Restricts the information recipient from starting or participating in a competing business for a set period, where appropriate.
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Non-solicit clause: Restricts the information recipient from approaching or recruiting certain employees, contractors, clients, or customers.
These clauses differ from confidentiality obligations and may be subject to legal limitations. They should be reasonable for the circumstances.
Step 5: Add final details
Include any additional terms that are unique to your situation and not already covered in the questionnaire.
You can then add signing details to complete your document, such as:
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When will the parties sign
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Whether signatures will be witnessed
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Any additional signing instructions
Step 6: Download, print, and sign
Once you complete the questionnaire, you can download and print your customized Confidentiality Agreement.
Each party should review the agreement carefully before signing. LawDepot’s eSign feature can also help the parties sign the document electronically.
Confidentiality Agreement FAQs