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How to Write a Business Plan Confidentiality Agreement
Are you about pitching your idea to investors? If YES, here is a detailed guide on how to write an ironclad confidentiality agreement for a business plan. Confidentiality statements are documents that are prepared for the safety of parties that are about to go into a business contract.
Also known as non-disclosure agreements, confidentiality statements help to preserve sensitive information that various business parties might bring to the table when transacting business. Business confidentiality statement in essence is a document that states that when a company’s business plan has been revealed, they will not be able to discuss the contents of it with anyone that is not part of the agreement.
Confidentiality or nondisclosure agreement has various uses in the world of business. An individual with a patentable invention or idea may need to enter into partnership with a manufacturer or marketing firm; and of course, he would want to keep his or her invention a secret.
Again, two companies considering a joint venture may need to share the names of their investors – but may not want those names to reach competitors’ 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.
Tips to Note When Writing a Business Plan Confidentiality Statement
A. use the proper contract format.
The proper contract format that is generally used when writing a confidentiality statement is the standard contract format. In this writing format, single-spaced paragraphs with a double space between them is used. Each paragraph constitutes a separate term of the contract and are also numbered for specification. If you have any sub-paragraphs, indent them under the main paragraph and mark them with a letter, as though you were writing an outline.
B. Agreement type
There are two types of agreement to use when writing your confidentiality statement. A unilateral and mutual confidentiality agreement. A unilateral confidentiality agreement is used when only one party is disclosing information, while a mutual agreement is used when both or all parties involved are disclosing information.
You have to decide whether the confidential relationship established will be mutual or one-way. Mutual confidentiality agreements are necessary when you’re providing information to a company so they can provide you with something secret in return. For example, you may be disclosing your plans for a secret invention to a professional who will help you devise a marketing plan.
You need a one-way confidentiality agreement if you need to share confidential information with an employee or contractor who will not be sharing secrets of their own, simply doing work for you. There are also other scenarios where you may require either type of agreement, that is why you have to note the type of confidentiality agreement you need.
How to Write an Ironclad Business Plan Confidentiality Agreement
Provide a list of parties involved in the agreement.
When writing a confidential agreement, you must identify who are the parties to be covered by the agreement. If someone is to be involved in the agreement, but he or she is not listed, you must know that the agreement is not binding on them.
For example, if the agreement is between two companies, the CEO of the company may be able to sign for her entire company, but the agreement should also specify that all employees of the company who have access to the information are bound by its provisions.
Parties can be identified by referring to classes of people, such as “employees” or “engineers,” as long as the person signing the agreement has the authority to bind those people.
Unless the agreement forbids a contractor to have a subcontractor assist with the work, all subcontractors should be included as parties to the agreement as well. This is done so as not to leave any loopholes behind that people can take advantage of.
Describe what the other party is agreeing to
In this part, you need to make known the types of information you wish to keep confidential. This can include any sort of information that might be exchanged between the parties. For instance, if you are designing a software, you might include not only the code and design of the app itself, but also any prototypes, testing procedures and results, or reviews and comments from designers.
This portion of the agreement is designed to set the boundaries of confidential information without disclosing the information itself. It can also be stated that information cannot be disclosed without written consent of the Disclosing Party. The information should only be used for business purposes, and only on a “need to know” basis. And that the information can only be disclosed when the receiving party signs a non disclosure agreement.
List information excluded from confidentiality
Of course not all information should be hidden in a business arrangement. So, for this reason, you need to specify the information that are not under confidentiality. These information may not be a list of specific things, but broad categories of information that don’t have to be protected as confidential. Most of these categories are created by law.
For instance, if an information is already public knowledge then it is not be put under the category of protection. Likewise, information that the receiving party learns from a third party or of which they had prior knowledge cannot be considered confidential, and should be listed as non confidential.
One of the most important exclusions is that if the receiver creates something independently before entering the confidential relationship, it cannot be considered party of the confidentiality agreement even if it happens to use or include some of the same or similar secret information or processes.
Other things that are not under the confidentiality agreement include;
- An information the Receiving Party owned before the agreement
- If the Receiving Party legally received it from another source
- If the Receiving Party is required to disclose in a lawsuit or administrative proceeding
- If it is being or has been developed by the Receiving Party’s employees, consultants, or agents.
Describe what happens if the other party breaches the contract
Wherever there is a law, there must be consequences for breaking it. A typical remedy for this type of contract is an injunction. You can ask for a court order to stop the person who breached confidentiality from continuing to share the information in violation of the agreement.
In some federal cases, under the DTSA, a court may grant the owner the right to seize the property which may be used in “extraordinary circumstances.” You may also require the return of Confidential Information.
You also have the ability to sue for damages incurred as a result of the breach of confidentiality, which may include penalties. For example, in some states you may have the ability to get double or triple damages if the breach was intentional rather than accidental.
Some confidentiality agreements include stiff financial penalties if secret information is revealed to the general public. Others leave the consequences up to a judge or arbitrator to decide. How detailed you want to get with penalties generally relates to how unique the information being disclosed is, and how damaging it would be if it got out.
Establish the obligations of the party receiving the information
Confidentiality agreements typically limit the ways the receiving party can use the confidential information provided, as well as provide the standard for keeping and protecting confidential information.
For example, if you’re looking for investor evaluations of something you’ve invented, your confidentiality agreement may specify that the information can only be used for the purposes of evaluating the product and not in the evaluator’s own business.
If you’re having an employee or contractor sign a confidentiality agreement, you would probably want to limit your employee’s use of information to the performance of job duties directly related to the employment.
Many confidentiality agreements recite that receivers must keep the information disclosed to them in the same way they would keep their own confidential information. However, this statement only works if the receiving party has a known policy for handling confidential information.
Generally, confidentiality standards include limiting access to the information and taking basic precautions to keep the information secure so it doesn’t easily fall into outside hands. Such precautions might include, for example, using encryption for emails discussing the confidential information.
If your confidentiality agreement relates to software designs, inventions or technology, it should include a statement that the receiver of the information has no license, expressed or implied, in the information by virtue of its disclosure.
State when the agreement ends
Whatever has a beginning must have an end, and same applies to a confidentiality agreement. In writing one, you have to specify when the agreement is going to elapse, and when the parties can get out of the loop. State when the agreement ends and what notice must be given to the other party about the termination. You can set one of two options for when the agreement ends:
Your agreement should specify two time periods: the period during which disclosure will be made, and the time period thereafter during which the information should be kept confidential.
American confidentiality agreements typically last for a period of five years, although some may only last two or three years. The end point doesn’t have to be a specific date, but there should be a specific date used as a starting point. Otherwise it’s unclear when the agreement will take effect and for how long it will be enforceable.
If your agreement specifies a confidentiality period of two years, for example, but fails to establish when that two year period starts, the receiver of the information can argue that she didn’t believe the agreement had gone into effect yet.
Another way to set a specific starting date is to have the confidentiality period start from the date the agreement is signed. If you use this method, make sure you don’t disclose any secrets until you have the signature and the agreement is in force.
The confidentiality time period also may end when a certain event happens. For example, if you’re seeking evaluation of a new product, the confidentiality period may end when you market and distribute that product in stores.
Add any necessary miscellaneous provisions
This section is typically located towards the end. The miscellaneous section is sometimes called boilerplate. All agreements contain various clauses that don’t fit in any other section, such as which state’s law will apply and whether attorneys’ fees will be available to an injured party if they agreement is breached. These agreements are then put under the miscellaneous section. This section, though negligent, but should not be overlooked because of the details it is wont to contain.
Provide space for all parties to sign the agreement
For your confidentiality agreement to be binding, it has to be signed. For this reason, you have to provide a page where parties involved in the agreement would pen down their signatures. Without the agreement signed, it cannot go into effect.
With the use of a confidentiality statement, otherwise known as a non-disclosure 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.
More on Business Plan Tips
Business Plan Confidentiality Statement
A business plan serves as a comprehensive roadmap that outlines the strategic vision, objectives, and operational framework of a business venture. It encompasses critical details such as market analysis, financial projections, marketing strategies, and operational procedures, providing a comprehensive overview of the business’s objectives and trajectory. In the process of developing a business plan , entrepreneurs often encounter the necessity of safeguarding sensitive and proprietary information, prompting the inclusion of a confidentiality statement within the document. A business plan confidentiality statement is a vital component that underscores the commitment to protecting confidential information and proprietary data, ensuring that the business’s competitive edge and strategic insights remain secure and safeguarded from unauthorized disclosure or misuse.
Purpose and Scope of the Confidentiality Statement
The primary purpose of a business plan confidentiality statement is to establish a legally binding agreement between the business and the intended readers or recipients of the business plan. This agreement emphasizes the confidential nature of the information contained within the business plan and serves as a formal acknowledgment of the recipient’s responsibility to maintain the confidentiality of the proprietary data and insights shared by the business. By clearly defining the scope and parameters of confidentiality, the statement reinforces the business’s commitment to protecting its intellectual property, trade secrets, and strategic business insights from unauthorized access, distribution, or exploitation.
Key Components of a Business Plan Confidentiality Statement
A robust business plan confidentiality statement typically includes the following key components:
- Definition of Confidential Information: Clearly defining the scope of confidential information that is encompassed within the business plan, including proprietary data, financial projections, marketing strategies, operational procedures, and any other sensitive business insights that are not intended for public disclosure.
- Non-Disclosure Commitment: Outlining the recipient’s obligation to maintain strict confidentiality and refrain from disclosing, reproducing, or distributing the confidential information contained within the business plan to any external parties without the prior written consent of the business.
- Limitations on Use: Stipulating the permissible uses of the confidential information solely for the purpose of evaluating the business proposal and facilitating potential business collaborations or investment opportunities, emphasizing the restriction on using the information for personal gain or competitive advantage.
- Duration of Confidentiality: Specifying the duration of the confidentiality agreement, including the timeframe during which the recipient is obligated to maintain the confidentiality of the information, as well as any provisions for the perpetual protection of certain proprietary information beyond the termination of the business relationship.
- Legal Recourse and Remedies: Enumerating the legal remedies and consequences associated with the breach of confidentiality, including potential legal action, financial penalties, and the imposition of injunctive relief to mitigate the unauthorized dissemination or misuse of the confidential information.
- Binding Nature of the Agreement: Expressing the mutual agreement and understanding between the parties involved, highlighting the binding nature of the confidentiality agreement, and underscoring the significance of adhering to ethical business practices and professional integrity throughout the business engagement.
Ensuring Comprehensive Protection of Intellectual Property
By incorporating a well-crafted confidentiality statement within the business plan, entrepreneurs can proactively safeguard their intellectual property, trade secrets, and proprietary business insights, fostering a secure and trustworthy environment for sharing confidential information with potential investors, business partners, or stakeholders. The inclusion of a confidentiality statement not only fortifies the legal protection of sensitive data but also reinforces the business’s commitment to transparency, integrity, and ethical business conduct, fostering a culture of mutual trust and respect within the realm of business collaborations and strategic partnerships.
Examples of Confidentiality Statements For Business Plans
Here are a few examples of business plan confidentiality statements that you can use as references or templates for drafting your own business plan confidentiality agreement:
Simple Business Plan Confidentiality Statement:
“This business plan and the information contained herein are confidential and proprietary to [Company Name]. The recipient acknowledges that the information provided in this document is solely for the purpose of evaluating potential business collaborations or investment opportunities and agrees to maintain strict confidentiality. The recipient further agrees not to disclose, reproduce, or distribute any part of this business plan without the prior written consent of [Company Name]. Any unauthorized use or disclosure of this information may result in legal action and other appropriate remedies.”
Comprehensive Business Plan Confidentiality Statement:
“The contents of this business plan, including all financial, operational, and marketing data, are the sole and exclusive property of [Company Name]. The recipient acknowledges that the information provided in this document is strictly confidential and is disclosed solely for the purpose of evaluating potential business opportunities. The recipient agrees to exercise the utmost discretion in safeguarding the confidentiality of this information and to refrain from disclosing, reproducing, or disseminating any part of this business plan to any third party without the express written consent of [Company Name]. Any unauthorized use, disclosure, or distribution of this information may result in legal action, financial penalties, and injunctive relief to protect the proprietary interests of [Company Name]. This confidentiality agreement remains valid for a period of [specify duration] following the termination of any business relationship or engagement.”
Confidentiality Statement for Business Plan Presentation:
“This presentation contains confidential and proprietary information belonging to [Company Name] and is intended solely for the use of the intended recipients. The recipient acknowledges that the information provided in this presentation is of a sensitive and confidential nature and agrees to maintain the strictest confidence in safeguarding the proprietary data and insights shared herein. The recipient further agrees not to disclose, reproduce, or distribute any part of this presentation without the express written consent of [Company Name]. This confidentiality obligation extends to all discussions, materials, and information shared during or following the presentation. Violation of this confidentiality agreement may result in legal action and other appropriate remedies to protect the intellectual property and business interests of [Company Name].”
Business Plan Non-Disclosure Agreement (NDA)
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Updated December 22, 2022
A business plan non-disclosure agreement (NDA) allows someone to share a business plan without fear of a third party using it for their own benefit. Business plans are highly confidential, especially detailing a marketing strategy with a different approach to a specific market. An NDA makes the shared party liable if the plan is used for anyone else’s personal benefit.
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Business Confidentiality Statement
Its a tool that businesses use when they discuss their business plan with others who will be given information that the company wishes to keep a secret. 3 min read
A business confidentiality statement is a tool that businesses use when they discuss their business plan with others who will be given information that the company values or wishes to keep a secret. In essence, it is a document that states that when a company's business plan is seen, they will not be able to discuss the contents of it with anyone outside of the agreement.
Confidentiality statements may also be referred to as non-disclosure statements that sales representative and other employees often sign but are typically used in regards to exposure to a company's business plan. They are intended to provide protection for both parties involved in a business plan or transaction.
How Can a Confidentiality Statement Protect You?
In every confidentiality agreement, there should be a provision that states that both parties will not disclose any of the information they are about to discuss or see in a business plan. In addition to that, there should also be a provision that covers damages which will occur in the event that a party breaches the agreement. This is often a place to list the monetary liability the party may be sued for.
If you do not have a confidentiality agreement in place when you write your business plan, then you are opening the door for anyone who sees your business plan to use parts of it without your permission. While copyright law may protect a large amount of it, not all of it will be protected.
If you do have a confidentiality agreement in place and someone does breach it , you will be entitled to some form of compensation and be able to possibly obtain a judgment from the breaching party. If you do not have an agreement in place, the courts are not likely to give you any damages if someone were to steal your idea.
When Do You Need a Confidentiality Agreement?
It is good practice to have a confidentiality agreement anytime that you make a business plan. Some of the benefits of having a confidentiality agreement include:
- You can make sure that your financial information stays private.
- You can protect your ides even though the plan may need to be seen by multiple parties.
You should request a signed confidentiality agreement when showing your business plan to anyone, even to a bank. Even though they work for an organization that values confidentiality, it does not mean that everyone working there will be ethical. Always make sure the agreement is signed before handing the business plan over.
Confidentiality Statement Business Plan
The downside of requiring a confidentiality agreement for your business is that it may turn off investors as it can signal distrust. They may feel that you think they plan on stealing your idea and may not be comfortable providing funds for the investment. Other reasons that you may choose not to use a confidentiality agreement include:
- It can make it seem as though you are a novice.
- Some people may find it offensive.
- You may not be able to secure funding and keep it confidential.
Who Signs a Confidentiality Statement of a Business Plan?
In typical fashion, confidentiality agreements would precede or accompany a business plan submission. When requiring the signing of a confidentiality agreement, you should require signing by anyone who you anticipate will see the plan to ensure the information contained in it is confidential.
There are some considerations that need to be made before deciding to use a confidentiality agreement. The first is that your confidentiality agreement is not only protecting an invention, but it also should be used to protect:
- Business ideas.
Until you have received financing or the investment you need to get your business started, anyone will be able to create an identical business without having to ask permission.
It is also important when drafting a confidentiality agreement that it is simply stated and clearly outlines what needs to be protected and what can occur if the agreement is violated. The agreement should be non-intimidating in its verbiage. you can use this agreement for anyone who you may be in contact with about your business before it is stared such as financers, clients, and potential vendors.
If you need help with a business confidentiality statement, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.
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Content Approved by UpCounsel
- Confidentiality Agreement
- Purpose of a Confidentiality Agreement
- Confidentiality Contracts
- Penalty for Breach of Confidentiality
- How to Draft a Confidentiality Agreement
- Drafting Confidentiality Agreements: What You Need to Know
- Confidentiality Clause Sample
- Confidentiality Agreement Law
- Confidentiality Agreement for Business Partners
- Confidentiality Agreement Consideration
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- Confidentiality Clause
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- Acceleration Clause
- Arbitration Clause
- Assignment Clause
- Cancellation Clause
- Choice of Law Clause
- Consideration Clause
- Definitions Clause
- Dispute Resolution Clause
- Entire Agreement Clause
- Escalation Clause
- Exclusivity Clause
- Exculpatory Clause
- Force Majeure Clause
- Governing Law Clause
- Indemnification Clause
- Indemnity Clause
- Insurance Clause
- Integration Clause
- Merger Clause
- Non-Competition Clause
- Non-Disparagement Clause
- Non-Exclusivity Clause
- Non-Solicitation Clause
- Privacy Clause
- Release Clause
- Severability Clause
- Subordination Clause
- Subrogation Clause
- Survival Clause
- Termination Clause
- Time of Essence Clause
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Confidentiality clause defined.
Confidentiality clauses, also known as non-disclosure agreements, prevent the signing party from divulging sensitive information, personally identifiable information (PII), and trade secrets. These protections are for documents as well as verbal communications. Parties can negotiate the terms of the confidentiality clause according to scope and obligations as necessary.
This article also defines confidentiality clauses.
You can create one-sided or mutual confidentiality clauses. One-sided confidentiality clauses limit one party from disclosing any information about the other. In a mutual confidentiality clause, both parties must not reveal specific information about each other.
Here is another article that explains confidentiality clauses.
Purpose of a Confidentiality Clause
The purpose of a confidentiality clause is to protect a company from the disclosure of their trade secrets and sensitive information. For personal information to stay that way, there needs to be a confidentiality clause for documents and for email communications.
Regardless of the methods of communication, industry, or position, a confidentiality clause protects companies if they need to file a damages claim against someone who disclosed critical details to someone, whether they planned to exploit the information or not.
Confidentiality Clause Examples
Examples of confidentiality clauses include:
- Example 1: Preventing employees from talking to the press
- Example 2: Limiting the disclosure of on-site business practices
- Example 3: Stopping business partners from sharing IP rights
- Example 4: Agencies preventing models from divulging their strategies
- Example 5: Protecting a company when working with contractors
Confidentiality Clause Samples
Sample 1 – Employment Contract :
Confidential Information .
- Employee shall not, during the term of this Agreement or at any time thereafter, make unauthorized use of, or divulge to any other person or entity Company's trade secrets, confidential or other information as is described in Article 4, Section B, without prior written permission from Company's President. This Confidentiality Covenant shall apply to, but shall not be limited to all information protected under the Georgia Trade Secrets Act of 1990, and, in addition thereto, to all information described in Section B of this Paragraph and the protections provided to the Company under this Agreement shall be in addition to and not in lieu of the protections afforded under said Act.
- At all times during the term of this Agreement, and after its termination Employee shall take all reasonable precautions to protect the integrity of and shall refrain from any use or divulgence of Company's confidential information and trade secrets including, but not limited to: all files, tickler files, resource information, rolodex, records, documents, drawings, specifications, equipment, customer lists, supplier lists or information, product, supplier or customer catalogues, and similar items relating to the business of Company, or copies thereof, whether the originals or copies were prepared by Employee or otherwise came into Employee's possession.
- The confidential information and trade secrets described above shall remain the exclusive property of Company and shall not be removed from the premises of Company under any circumstances whatsoever without the express prior written consent of Company.
- If Employee breaches or threatens to breach this Article 4, Company shall be entitled to obtain injunctive relief containing such mandatory or prohibitory clauses as are necessary to prevent the continued breach of this covenant of confidentiality. Company shall also be entitled to any other remedies provided under this contract or at law. If Company elects to enforce this Paragraph through a court of law of appropriate jurisdiction, Employee shall be liable for payment of all court costs, attorney’s fees, and necessary expenditures, which Company incurs.
Security Exchange Commission - Edgar Database, EX-10.6 3 ubi_ex10z6.htm EMPLOYMENT CONTRACT, Viewed April 5, 2021, < https://www.sec.gov/Archives/edgar/data/1320729/000137647415000176/ubi_ex10z6.htm >.
Sample 2 – Sale and Purchase Agreement :
Confidentiality . From and after the Closing Date, for a period of three (3) years after the Closing Date, Seller agrees and agrees to cause the Selling Affiliate, to treat all confidential data, reports, records, processes, know-how and other information it has developed or has in its control or possession relating to the Business, whether or not marked as confidential or proprietary (the “Information”), as confidential and to not disclose, discuss or reveal such Information to a third party without the prior written consent of Purchaser, unless Seller or the Selling Affiliate are required by applicable Law or order of a Government Authority to disclose any such Information and Seller or Selling Affiliate have informed Purchaser of such requirement and given Purchaser a reasonable opportunity to contest such requirement or to seek a protective order or a stay of such disclosure order. Seller agrees to exercise all reasonable efforts to avoid the disclosure of such Information to any third party. The obligations in this Section 7.08 shall not apply to any portion of the Information:
(a) which is or becomes, through no act or failure on Seller’s or the Selling Affiliate’s part, published information known on a non-confidential basis; or
(b) which corresponds in substance to information hereafter furnished to Seller or the Selling Affiliate by others as a matter of right without restriction on disclosure; or
(c) which is independently developed by or on behalf of Seller or the Selling Affiliate, without knowledge of the Information.
Security Exchange Commission - Edgar Database, EX-10.(I) 4 d230919dex10i.htm SALE AND PURCHASE AGREEMENT , Viewed April 5, 2021, < https://www.sec.gov/Archives/edgar/data/16040/000119312511324512/d230919dex10i.htm >.
Sample 3 – Master Sale Agreement :
Security Exchange Commission - Edgar Database, EX-10.33 5 dex1033.htm MASTER SALES AGREEMENT , Viewed April 5, 2021, < https://www.sec.gov/Archives/edgar/data/1350415/000119312506131362/dex1033.htm >.
Common Contracts with Confidentiality Clauses
Common contracts with confidentiality clauses include:
- Employment agreements
- Purchase agreements
- Business associate agreements
- Client services agreements
- Letters of representation
Confidentiality Clause FAQs
Confidentiality clauses carry legal implications for employees and employers alike. Avoid making legal mistakes. Check out the confidentiality clause FAQs below to learn more.
Are confidentiality clauses enforceable?
Confidentiality clauses are enforceable as long as they meet the elements of a contract. Exceptions to a waiver may apply. For instance, companies can’t enforce confidentiality clauses to protect public policy violations from discovery.
What should be in a confidentiality clause?
Confidentiality clauses can be as long or as short as necessary. A confidentiality clause should contain the following elements at a minimum to be enforceable:
- An agreement is made
- The other party accepts the agreement
- Both parties exchange consideration
You should also have parties sign and date the agreement. Speak with employment lawyers to help you draft, negotiate, and execute the legal particulars of a confidentiality clause.
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Confidentiality Statement Example
Individuals and organizations prepare a confidentiality statement to safeguard their sensitive information. A confidentiality statement acts as legal binding between two or more parties who have partnered with each other. In this article, we have provided few examples of confidentiality statement.
Confidentiality statements, also known as non-disclosure agreements, are contracts which are prepared to safeguard the interests of an individual/company. These agreements ensure the protection of sensitive information.
Confidentiality agreements are used by individuals and entrepreneurs across the globe to protect sensitive information, such as inventions, business strategy, client database, compensation reports, etc. In case a company suffers loss or damage due to a breach of confidentiality agreement, it has the right to seek injunctive and claim compensation from the party who has breached the agreement.
Sample Confidentiality Agreement
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