Understanding Confidentiality Agreements

Confidentiality agreements also known as nondisclosure agreements, are contracts entered into by two or more parties in which some or all of the parties agree that certain types of information that pass from one party to the other or that are created by one of the parties will not be disclosed to other parties. In Rwanda, such agreements are often used when two or more companies or entities or individuals are considering doing business with each other or merging or some kind of joint venture. The said entities usually exchange sensitive technical or commercial information so as to understand the processes used in each others business for the purpose of evaluating the potential business relationship and normally enter into confidentiality agreements so as to protect this sensitive technical or commercial information from third parties. Closely related to confidentiality agreements are confidentiality clauses which are typically inserted into employment contracts. The purpose of a confidentiality clause in an employment contract is usually to protect the employer’s trade secrets which the employee may come across during the course of employment from the employer’s competitors. Confidentiality agreements typically contain the following clauses. The parties’ clause: - This clause stipulates the names of the parties to the agreement. The definition of confidential information clause:-Confidentiality information is normally defined as including but not limited to data, know-how, financial information, customer lists, vendor lists and business practices. As one would imagine, the company or individual disclosing the confidential information (the “discloser”) would like the definition to be as all-inclusive as possible; on the other hand, the company receiving the confidential information (the “recipient”) would like to see as narrowly focused a definition as possible. It is all subject to negotiation. The Exclusion clause: - This clause enumerates the types of information which are excluded from the definition of confidential information. It is very important that the recipient of information include these exceptions in the confidentiality agreement. Some commonly employed exceptions are information that the recipient can demonstrate that they had prior to receipt of information from the discloser, information that becomes known to the public through no fault of the recipient, information that becomes known to the recipient from a third party that has a lawful right to disclose the information, information that was public knowledge before the disclosure of the information to the recipient and information independently created by the recipient. The standard in handling confidential information clause. Usually, such a clause requires each party to protect the other’s confidential information with utmost diligence. The duration clause: - The agreement should contain a time frame during which disclosures will be made and the period during which confidentiality of the information is to be maintained. The Penalties clause: - This clause enumerates penalties in case of breach of confidentiality. They are normally in form of monetary sums to be in case of breach. In conclusion, there are several situations where a confidentiality agreement is appropriate and may be proposed. Knowing a few basic points concerning confidentiality agreements can ensure that the important purposes they serve will not be defeated by ambiguities or ignorance of the meaning of terms used in the agreement. kalricardo@yahoo.com Richard Balenzi is a lawyer