Confidentiality Letter Agreement & Undertaking (Mutual)

Confidentiality Letter Agreement & Undertaking (Mutual)

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This template has a traditional layout designed for easy customisation and to suit a variety of complex situations. Here the provider or supplier of confidential information imposes very extensive obligations on the recipient of that confidential information.

Product details

Author: Noric Dilanchian
Date revised: 16 April 2013
Format: Agreement
Agreement layout: Letter Agreement
Agreement bias: Provider
File type: Word
Pages: 8
Field: Intellectual Property, Innovation, Commercialisation
Tags: confidential information, non-disclosure agreement, NDA
Product ID: td00003

Other template features

This template letter agreement suits situations where parties are involved in the mutual exchange of confidential information. The letter layout provides broad protection while being easy to understand.

For more information on this template product see the Overview, User Guide and Author tabs below.

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Confidentiality Letter Agreement and Undertaking (Mutual)

This template confidentiality agreement:

  • has a short form letter agreement layout - rather than a long form layout;
  • suits situations where parties are involved in the mutual exchange of confidential information which each wishes to protect - hence the last word in brackets in the template title "(Mutual)"; and
  • is for use where the information is for general business or organisational purposes.

The obligations can be stated to bind individuals or incorporated entities or individuals and their related company or organisation (a concept defined broadly).

The template is both an agreement and an undertaking because a duty of confidence can arise under a written or oral agreement under Contract Law or a written or oral undertaking under Equity Law.

Selecting between mutual and non-mutual agreements

This template is for the mutual exchange and protection of confidential information. Given it imposes mutual obligations the template is not biased in favour of one party. In this regard note that in favour of each party, under the heading "Inclusions and Exception" the template contains a statement of exceptions to the agreement's confidentiality obligations.

Confidentiality agreements and obligations can be imposed so that they are either "one way" (ie for the benefit of one party) or "two way" (ie working to the benefit of each party). Mutual agreements are often used where parties are in collaboration and are providing confidential information to each other. This template is a two way agreement.

Selecting between short or long forms

As a short and less detailed document, a confidentiality letter agreement tends to best suit one off, simple, or generic situations. The confidentiality letter's brevity is sometimes not suitable if higher certainty of legal protection is sought. A more detailed or customised confidentiality contract will tend to provide a higher certainty of legal protection. Nonetheless the letter layout works sufficiently well in a remarkable number of situations.

The benefit of the letter layout is that its legal content can provide broad protection while being easy to understand. This reduces negotiation time, speeds up the process to signature, and minimises costs. It also improves communication between contracting parties, making disputes less likely by giving each party a clear understanding of what is expected of them. In turn, this builds trust into the commercial relationship and strengthens its foundation.

Select carefully. Sometimes a more detailed agreement is appropriate. Adopting too light an approach can provide insufficient protection for example for complex information such as a detailed new chemical formulation or technical specifications for industrial machinery.

Must the duty of confidence be express and in writing?

An obligation does not have to be expressly stated (it can exist even if it is only implied), though expressly stipulating an obligation is desirable.

An obligation does not have to be stated in writing. It is not essential to have a written confidentiality agreement (AKA non-disclosure agreement), though having one in practical terms is very desirable.

In practice and law, there is no distinction between a "confidentiality agreement" and the Americanisms – “NDA” or “non-disclosure agreement”. The term “confidentiality agreement” makes plain the history of this area of the law as being linked to its origin in English equity law, ie confidentiality law.

What provisions should an agreement contain?

A confidentiality agreement should typically define:

  1. what confidential information is covered;
  2. who accepts the confidentiality obligation, and hence is under a duty of confidence; this may be both an individual and the individual's company or organisation;
  3. what field of law governs the obligation, eg contract law, confidentiality law, and equity law relating to undertakings;
  4. for what duration must the confidential information remain confidential;
  5. what use can be made of the confidential information by the recipient;
  6. what practical procedures or safeguards must the recipient apply to protect the information; and
  7. what is the governing law.

This list is not comprehensive. It is often the case that topic 1 is of the greatest concern. This is due to the often poor level of definitional work by the persons responsible and their legal advisers.

What is confidential information?

Care should be taken to define the information by asking the question: What confidential information is covered?

The categories or types of confidential information covered by the law are unlimited. They can include existing and future data, records, documents and information, whether disclosed verbally, in writing, or electronic media. For example, they may be new business ideas, concepts for inventions, marketing strategies or financial data.

The types of confidential information most likely to be dealt with by the provider of that confidential information includes particulars of clients, customers, suppliers, employees and contractors, mailing lists, databases, pricing information, financial information, future product and service plans and other information not generally known outside a business.

Clearly not all information amounts to confidential information under equity law. Excluded is information in the public domain. For example, information in books sold in bookstores is clearly not confidential, while information set out in an unreleased report to government may be confidential.

If there is no contract determining the issue, to determine whether information is confidential (and therefore protectable) among the factors courts have considered are the:

  • emphasis on secrecy given by the proprietor in relation to the information (eg marking documents "CONFIDENTIAL", storing them in a limited access situation etc.); [This can be maximised by adopting the procedures specified below, including use of confidentiality statements, written confidentiality undertakings and confidentiality letter agreements.]
  • extent to which the information is known by third parties outside the proprietor's business;
  • value of the information to the proprietor and its competitors;
  • amount of money spent by the proprietor in developing the information; and
  • ease or difficulty with which the information could be properly acquired or developed by others.

The following means for protecting confidential information are ranked in their general order of usual usefulness for legal purposes (as opposed to commercial purposes):

  • create a specific or dedicated long form confidentiality agreement to govern a particular circumstance;
  • create a written and signed confidentiality letter agreement and undertaking, both to cover a specific situation;
  • create an oral confidentiality statement recorded in a file note, diary note or best of all in written communication with the other side (eg in an emal);
  • make an oral confidentiality statement; and
  • remain silent, allow circumstances to merely imply that a duty of confidence exists.

Practical procedures reduce risk

Adopt the following procedures when judgement indicates that it is appropriate, to protect information and maximise the possibility that it will be considered (eg by a judge) to be "confidential information" in a legal sense:

  • ensure contractors as well as new and current employees sign human resource contracts containing confidential information provisions such as non-disclosure obligations, and where appropriate, non-competition obligations which operate while employees are in an organisation’s employ and when they leave;
  • stamp, mark or type "Commercial-in-Confidence" on all documents regarded as confidential (for example see the footer to this guide);
  • where written non-disclosure or confidentiality undertakings are not appropriate, begin discussions by firstly obtaining an oral confidentiality statement (see the following example) and record the fact in a file note or a diary note: "The information I may reveal to you is secret and confidential information. I am only prepared to reveal it to you on the express condition that you will keep it secret and confidential. You must agree to this condition before I proceed."
  • ensure licensees, joint venturers, subcontractors and others having contact with confidential information sign confidentiality undertakings or agreements and (where appropriate) non-competition obligations;
  • limit access to a "need to know basis" for confidential information ie establish levels of privilege;
  • institute sign-out procedures for library borrowings and sign-in procedures for those who access a confidential database;
  • place security messages or warnings in documents, document storage rooms, intranets, research labs and elsewhere as appropriate;
  • establish passwords, keys , locks and other security systems to regulate access to and disposal of information;
  • expressly note the confidentiality of information in emails, faxes, letters, minutes of a meeting or other written records or documents; and
  • document confidential information procedures in a policy and procedures manual.

User Guide

An advantage of the brevity of the letter agreement layout for this template for a confidentiality agreement is that it has a reduced number of tasks for customisation. Using this template, customisation is required in at least five practical tasks. Here is a short statement about them.

  • Task 1: Insert the current date. This is the date the Agreement will apply from once signed by the recipient.
  • Task 2: Insert the name of the individual and/or the organisation (if any); if there is an organisation insert its name at the end of the letter in the signature block, otherwise delete the relevant text in the signature block.
  • Task 3: Insert the relevant address, at a minimum an email address is acceptable.
  • Task 4: Briefly describe the confidential information in the "INFORMATION REGARDING" section, if greater specificity is appropriate add an attachment but don't reveal the secrets.
  • Task 5: Select an appropriate and reasonable duration or period during which the confidential information must be kept secret.

Once customisation is complete, check thoroughly and ensure drafting instructions (eg open square brackets) and user guides have been deleted.

Discussion of practical tasks

Some of the tasks for customisation of this confidentiality agreements in a letter layout are discussed below in more detail.

Personalise and give context

To customise and improve the readability of letter agreements it is best to adapt the first sentence of the confidentiality letter agreement to refer to and link in specific dates, people, conversations and other communications.

Specify the addressee

Firstly, specify the full name of the other party or organisation (ie addressee) to the confidentiality letter agreement and include its address. If a company is involved there may also be a number to insert for identification purposes. For better identification of the addressee insert both physical and electronic addresses, eg email. It is usually best to specify a street address rather than a postal address.

Sometimes there will be more than one other party (ie multiple recipients), eg an individual and his or her company or two or more companies.

The complex part of this task is to examine the identity of the other party or parties. Clearly, you need the appropriate party or parties (ie the addressee aka "the other party") to be bound to an agreement or undertaking on acceptance. You may be dealing with an individual or one who also has involved a company or other organisational affiliation. It is for this reason that the template contains the words “if any” after references to an organisation. There are many possibilities or combinations. You may be dealing with an individual, a company, a partnership, a trust, a hybrid of these or some other entity, organisation or business structure.

For Australia:

  • you can conduct a search at www.search.asic.gov.au/gns001.html to check the name, Australian Company Number (A.C.N.), Australian Business Number (A.B.N.), and other details of the addressee.
  • It is a good idea to double check the Australian Business Number (A.B.N.) details at: www.abr.business.gov.au/Index.aspx.
  • It is a good idea to make the above links favourites for drafting, checking and dealing with contracts and related legal communication. They should be used to check particulars of an addressee, organisation or company every time a contract or communication is prepared with the intention that the contract or communication be legally binding.

Briefly describe the confidential information

Insert a brief description or refer to the specific confidential information. This is usually best done in the "Re" or subject section of the confidentiality short form or letter agreement. If needed, further detail can be added in the body of the letter agreement.

Sometimes the "Re" or subject section doesn't provide enough space. Where a detailed description is appropriate, add an attachment as a final page to the Agreement. More extensive definitions are useful for identification purposes to avoid uncertainty or enforceability due to lack of specificity.

However, there is a balance to strike between brief reference to the information and dangerously detailed definition of it (thereby potentially risking giving it away before the agreement and undertaking is accepted). The brief reference may be somewhat vague, for example as “An improved mouse trap” or more detailed, eg “An improved mouse trap using a current of electricity”. If there are material items which will be supplied following acceptance, then refer to them, eg video animation technology, invention prototype, engineering drawings or branding names, concepts and designs.

Until acceptance never disclose or attach any valuable confidential.

In detailed agreements there is often a longer definition of confidential information. For example a more detailed definition can be used to include business information, managerial information, creative information, scientific information, technical information or item-specific information.

Select counter-signature position

At the end of the confidentiality letter agreement there is a signature block where the individual and his or her organisation (if any) can be again identified. If you are dealing with an individual who has no company or other organisational affiliation then delete words "in my own right and for my organisation".

Further customise the template

Customise the confidentiality letter agreement to suit specific circumstances as appropriate. It is dangerous to use a template document as if it is a solution for all situations without customisation. Customisation is critical because there are many variables. They include the type of information, its value, the document layout most suitable for the circumstances and the purpose of the required document.

Additional user guide information is set out in the template.

Noric Dilanchian

Company: Dilanchian Lawyers & Consultants
Tel: +61 2 9269 0229
Skype: noricd

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Managing Partner of Dilanchian Lawyers and Consultants, Noric founded Annexium. Like our other authors, he has a breadth of experience in continuing professional education, having presented from the early 1990s in Australia, United States, Malaysia, Singapore and Europe.

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