A mutual confidentiality and non-disclosure agreement is a contract between two or more parties in which the parties express their intention to disclose certain information for specified purposes and agree that such information will be used only for the intended purposes and that other access to the information will be restricted.
When should Mutual Confidentiality and Non-Disclosure Agreements be used?
Mutual Confidentiality and Non-Disclosure Agreement can be used when one organization (called ABC Company or ABC in the form) is interested in soliciting proposals from another organization (called the Interested Party or XYZ in the form) and the two organizations need to exchange confidential information in order to evaluate a possible transaction. The agreement does several things:
- It limits the uses of the confidential information;
- The agreement requires the party receiving the information to bind its advisors to the terms of the agreement and makes the receiving party responsible for improper disclosure of the information by its advisors
- It sets forth the steps to be taken if the party receiving confidential information receives a subpoena for the disclosure of the information
- It allows the disclosing party to disclaim any warranty that the information provided is correct (any such warranty, if any, should be in the definitive transaction documents if the parties decide for forward with a transaction);
- It sets forth procedures for the return or destruction of documents containing confidential information;
- It provides for remedies in the event of a breach by either party; and
- Provides that the obligation of confidentiality expires after 24 months (this could be extended, if desired).
What else do I need to know?
A basic confidentiality agreement should be signed before exchanging confidential business information. Generally, these agreements do not contain the proposed terms of the possible transaction, as this enables the parties to put an agreement in place to protect information before negotiating the terms of a transaction.
Download a template of the model agreement:
