Sometimes the terms Confidentiality Agreement and Non-Disclosure Agreement (NDA) are mistakenly used interchangeably, but in fact, they refer to two distinct concepts. Identifying the differences between these two legal documents can be challenging and we totally understand this. 

To help you understand everything, we have decided to write a blog post outlining all the distinctions between a confidentiality agreement and an NDA.

What is a confidentiality agreement?

A confidentiality agreement is an important legal document that helps protect sensitive information from being shared without permission. It is a written agreement between two parties, often employers and employees, that specifies the confidential material, knowledge, or information that the parties wish to share with one another for certain purposes but wish to restrict access to or by third parties. 

It is important for both employers and employees involved in such agreements to understand the terms of the agreement. In general, it should include an outline of what type of confidential information is included in the agreement; how long the confidentiality period will last; who has access to this information; what happens if there’s a breach of confidentiality; and any other relevant conditions relating to the use of confidential materials. 

Both parties must sign off on all aspects of this contract before they can move forward with their arrangement.

Multinational corporations that operate globally have some secrets that need to be kept safe. In order for these secrets to remain secure, people that are appointed in prominent roles are required to sign confidentiality agreements. 

The duration may change depending on the contract’s objective.

In addition, multinational corporations also carry out background checks on potential employees before they are hired in order to make sure they have no connection with competitors or other organizations that could potentially access sensitive data. 

Furthermore, all employees working at such corporations must abide by strict policies related to data security which include maintaining an inventory of sensitive data and ensuring its protection from unauthorized access.

When it comes to altering an existing contract, the parties involved must take certain steps in order to ensure that all terms are agreed upon and respected. Before any changes can be made, one of the parties involved must forward a solicitation in order to inform the other party.

A solicitation is an official document that serves as formal notice of any changes or cancellations. This document is typically sent through the mail, email, or other forms of communication, and it must be signed by both parties in order to be valid.

The purpose of a solicitation is to ensure that all parties involved are aware of any proposed changes before they are formally implemented. 

In some cases, solicitations will include specific terms and conditions that need to be agreed upon before the contract can be canceled or modified. This helps protect both parties from misunderstandings and potential legal disputes down the line. By thoroughly reading and understanding the contents of any solicitations received, all parties can make informed decisions about their contracts going forward.

Also, know the difference between an agreement and a contract?

What is a non-disclosure agreement?

An NDA, also known as a non-disclosure agreement, is a legal document that protects the security of the information communicated with one of the parties. To be more precise, enterprise-level businesses and their contractors often sign these agreements.

This document is important for businesses because it helps maintain the security of intellectual property, proprietary knowledge, and other sensitive data that can be vulnerable to unauthorized access. The purpose of this document is to ensure that the information remains protected and secure throughout the duration of the contract. 

Non-disclosure agreements are often used when the responsibility to maintain specific information is explicit (or one-way).

So what is the difference between a confidentiality agreement and a Non-disclosure agreement?

Confidentiality Agreement	Non-disclosure Agreement
A Confidentiality Agreement is more frequently used in employment or personal situations.	A Non-disclosure Agreement is more frequently used in third-party or startup situations
A Confidentiality Agreement is used when the obligation is two-way (or bilateral).	A Non-Disclosure Agreement is used when the obligation is one-way (or unilateral).
A confidentiality agreement establishes the confidentiality relationship between two parties by outlining what information is to be kept private and not shared with any third parties. It typically outlines the obligations of both parties to maintain the secrecy of the agreed-upon information for an indefinite period of time.	On the other hand, NDA defines specific information that must remain confidential from all outside individuals or entities, as well as what is allowed to be shared with those outside parties.
Confidentiality agreement protects databases containing sensitive data.	Non-disclosure agreements maintain the security of intellectual property, proprietary knowledge, and trade secrets

 

When is a Confidentiality Agreement/Non Disclosure Agreement (NDA) used?

‍Although the terms (and associated contracts) are basically the same, they are used in slightly different situations. 

For instance,

Confidentiality agreements are more commonly employed in professional and personal settings

Confidentiality agreements are now commonly used in both professional and personal settings. They play a vital role in protecting the interests of businesses, organizations, and individuals alike. In professional contexts, employers may require their employees to sign confidentiality agreements upon hiring. 

This is particularly relevant in industries such as technology and pharmaceuticals where confidential data must be protected. By signing a confidentiality agreement, an employee agrees not to disclose any information about their employer’s products or services without authorization from management.

A non-disclosure agreement is becoming more common in cases that involve startups or third parties

The type of data that needs to remain confidential in this case might be, business secrets, trade secrets, innovations, private information, pricing agreements, and financial information. These third parties may be suppliers, distributors, clients, or even investors.

A non-disclosure agreement is used when the obligation is one-sided (or unilateral).

A non-disclosure agreement is often used when there is a unilateral (one-way) flow of information. If there is a two-way (or multilateral) exchange of secret or financial information, the contract is more likely to be referred to as a “confidentiality agreement.”

Conclusion

In conclusion, it is important to understand the differences between a Confidentiality Agreement and an NDA. A Confidentiality Agreement outlines the expectations of both parties when exchanging confidential information, while an NDA further protects the disclosing party by preventing the receiving party from using or disclosing the confidential information. 

While both agreements are beneficial in protecting sensitive material, they are unique documents with different legal implications and should be used accordingly.