What does “confidentiality agreement” means?
Given the meaning by its title, a confidential agreement is a specific agreement between the party who give the information and the other party who receive the information. The receiving party agree that it will not disclose any of the information to any other parties without approval from the disclosing party. In an acquisition deal for example, the potential buyer will need a thorough information of the target company, including financial statement, application of technology, marketing strategy, list of vendors and customers and other important information of the company. After receiving and evaluating this information, the potential buyer will decide whether it will continue the transaction or not. Regardless of whether the transaction will be continued or not, the target company concerns that all disclosed information shall not be used or leaked or disclosed by the potential buyer to anybody. This concerns of the target company will be documented in a confidentiality agreement. However, obligation not to disclose the information is not without exeption. Typical exceptions to the definition of confidential information include (i) information publicly known or in the public domain prior to the time of disclosure, (ii) information publicly known and made generally available after disclosure through no action or inaction of the recipient, (ii) information already in the possession of recipient, without confidentiality restrictions, (iv) information obtained by the receiver from a third party without a breach of confidentiality, and (v) information independently developed by the recipient. Confidentiality agreements generally are valid for three to five years. The period of time depends the strategic value of the information to the discloser and how quickly the information may become obsolete.