“Three may keep a secret, if two of them are dead.” Benjamin Franklin, Poor Richard’s Almanack
Secrets, especially business secrets, are hard to keep, and companies may take extreme measures to protect their valuable confidential assets. There are times, however, when your confidential information may need to be shared in a limited manner. When discussing a potential business sale, franchise agreement, collaboration, subcontractor hiring, or other transaction, it’s important to protect yourself from the intentional or accidental spilling of secrets.
Before you begin sensitive business discussions, we recommend that the two parties begin by signing a nondisclosure or confidentiality agreement. A nondisclosure agreement enables you to explore a potential business relationship without fear that your existing business secrets will be compromised. In essence, the parties agree that certain confidential information may only be used to evaluate the potential relationship and may not be disclosed to third parties.
Among the important questions to examine are:
- What information must be kept confidential?
- Are there any exceptions in which confidential information may be disclosed? For example, can the information be shared with your attorney or financial advisor?
- What efforts are required to prevent disclosure?
- How long does the confidentiality agreement last?
- If confidential information is disclosed in violation of the agreement, what remedies do you have?