With the new term started you may have lots of ideas for your business that you will want to explore with potential new partners, designers, manufacturers… All of that is fantastic, but please please let me urge you to always have one thing with you when you go to that important first meeting: a Confidentiality Agreement (also known as a ‘Non-Disclosure Agreement’ or ‘NDA’).
This is a short agreement of about 4-5 pages which basically makes the other party promise that they will keep all of the information that they receive from you confidential. Key concepts in the agreement are:
- the definition of what exactly is to be treated as confidential information,
- the purpose of your discussions
- how long they have to keep the information confidential- usual terms are 2-3 years even after the agreement has ended
- if information is passed on to employees or advisors, they are caught too
- there are exceptions to the duty of confidentiality e.g. if the other party is ordered by a court to reveal something, they are allowed to do so or if the information was already in the public domain, they can use it
- at the end of the agreement, confidential information has to be returned to you or destroyed
There are two types of Confidentiality Agreement: “one way” and “two way or mutual”. The easiest way to remember each one is to think of traffic sytems; one way is when the confidential information flows in one direction only. For example, you are disclosing your secret recipe for chocolate that you want to sell to a manufacturer. The information just flows one way.
Two-way is when the information flows both ways and both parties agree to keep certain information secret. Using the same example above, you disclose your secret chocolate recipe to the manufacturer and the manufacturer discloses the special type of machinery and packaging process to you.
Needless to say, the Agreement will not physically prevent somebody from going off and revealing the information, but it will give you the ammunition to go to court and get an injunction to stop them from doing so. It will also give you proof that your information was meant to be kept secret and enable you to claim damages if the other party has gone off and made a nice little profit.
A final word of advice: if the person you want to do business with does not want to sign an NDA in the first place, then I wouldn’t do business with them!
If you are stuck for templates to use, our ‘oven ready’ document shop has both types of NDA for sale.