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Confidentiality Agreement Questions

Confidential agreement is a legal treaty or agreement between two or more parties who are privy to certain sensitive information, which should not be made available to others outside of this agreement. All the parties involved in the process would have to sign the agreement ascertaining that they would not disclose any of the exclusive information to any other parties. This is also known as a non-disclosure agreement. Many times when signing a confidentiality agreement, people are not sure who this covers and what legalities they could be facing. To know more about issues related to confidentiality agreement, read below the answers provided by Experts.

How does a confidentiality agreement work?

In the U.S, a confidentiality agreement can be used in many ways. A person, who wants to sell his/her assets and /or business, can sign an agreement with the buyer allowing the buyer to examine the confidential papers including bank records and financial books to confirm the value of the asset or business at hand.

An inventor also can sign a deal with other parties to evaluate/license his/her invention. The agreement makes sure that the vital/core information related to the particular invention in question remains secret between the inventor as well as the person evaluating only.

The agreement between an employer and employee is also a type of confidentiality agreement. In this, the employee declares that he/she would not divulge any confidential information related to the job that he/she does on behalf of the employer. In this case, some companies/employers even can ask the employee to sign a non-compete clause which means the employee cannot indulge in any business similarly to the employer even after couple of years of resignation.

In some cases, a person can enter in to such confidentiality agreement, where he/she wants to be protected for providing confidential information.

On what grounds can a confidentiality agreement be terminated or what needs to be done to declare a confidentiality agreement invalid?

In order to terminate a confidentiality agreement, both the parties may use the rescission process by signing a formal rescission document. Once the process is through, it would release both the parties of their obligations related to the agreement. This apart, if one of the parties can prove that he/she was made to sign the agreement under duress, or he/she signed the agreement after being intimidated by the other party, the agreement becomes invalid. But this would need to be proved in a court of law.

Is a non-compete/confidentiality agreement that was signed with one company enforceable once the company is acquired by another company?

In most of the cases the agreement remains enforceable. It all depends on the clauses mentioned in the agreement. A proper review of the agreement papers can clarify the same.

Does a confidentiality agreement enable the company to inspect the personal property of its employees?

Yes, in most cases this is legal. Most of the companies are including such clauses in the confidentiality agreement to safeguard their interest. They reserve the right to inspect computers or other electronic storage devices where sensitive information pertaining to company matters can be stored, whether the electronic repository is owned by the company or the employee.

Does a confidentiality agreement on a business letterhead serve the purpose?

No, most of the time this is not enforceable in the court of law as a confidentiality agreement on a business letterhead is not legally binding.

Can two parties get in to a verbal confidentiality agreement without signing proper documents? Is a verbal agreement legally binding?

Yes, two parties can enter a verbal confidentiality agreement if they want. Such verbal contracts are legally binding, but they are virtually impossible to enforce with the absence of written documents.

Confidentiality Agreements are forms of legal tools used in various organizations. It is always important to go through the entire document before signing to avoid any future trouble. All the clauses in the agreement need to state the purpose of the contract properly and clearly. The process involves the usage legal terms/jargons to make the agreement legally binding and enforceable in the court of law that a layman may not understand. To have a better clarity on issues related to confidentiality agreement, it is always good to consult an Expert who can answer your queries.
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