NDA vs confidentiality agreement: what's the difference?

Explainer
October 28, 2022
min

Every business has information they’d prefer to keep private. Whether it’s long-term strategies or clientele, protecting this information with an NDA or confidentiality agreement is key. But how do these agreements differ, and when should you use them? Let’s find out. 

Is an NDA the same as a confidentiality agreement? 

Non-disclosure agreements and confidentiality agreements are similar in many respects. However, they cannot be used interchangeably since they are designed for different circumstances. 

The most obvious similarity between an NDA and a confidentiality agreement is that they are both used to secure the privacy and secrecy of certain information. They achieve the same broad purpose but in a different format and context. 

It’s also typical for a confidentiality agreement and an NDA to include similar information. Both types of agreements usually outline who the parties to the contract are, what information must be protected, what these protective measures entail, and what will happen in the event of a breach. In fact, they follow a similar pattern to most business contracts

The consequences of breaching an NDA or confidentiality agreement are also near identical. Those that disclose confidential or private information risk being sued for damages, or receiving an injunction. That's why ensuring that you manage confidentiality agreements and NDAs effectively is paramount.

If your business needs to send out, manage and sign NDAs at scale, why not use our free Non-Disclosure Agreement template to streamline the process?

Given the similarities, you might assume that the agreements can be used interchangeably, right? Wrong. NDAs and confidentiality agreements are more complex than that, and there are a few nuances that make each one unique. We’ll explore these now.

So, what are the differences?

The biggest and most important difference between an NDA and a confidentiality agreement is that an NDA is better suited when only one party’s information sharing rights are being governed. A confidentiality agreement, by comparison, is typically used when multiple parties pledge to keep the information they exchange between them confidential. 

This means that NDAs tend to be classified as unilateral contracts. Unlike confidentiality agreements, NDAs are typically used when only one person or group makes a promise to keep certain proprietary information private. 

Non-disclosure agreements sent to new employees are a great example of this. Employees and contractors are usually exposed to a lot of trade secrets or proprietary information throughout their roles. However, since employees rarely share their own confidential information with employers, it’s unusual for them to require the same level of confidentiality in return. That’s why unilateral contracts like NDAs are most suitable in these cases.

By comparison, confidentiality agreements are typically used in multilateral agreements whereby multiple parties exchange (and promise to protect) confidential information. Since the obligation to maintain this confidentiality is a mutual one, confidentiality agreements can also be called ‘mutual NDAs’. 

Confusing, we know. But what’s important to remember is that most standard NDAs will be unilateral (one-way), and confidentiality agreements (or mutual NDAs) will not. 

Imagine, for example, a partnership between a manufacturer and vendor. The vendor needs to trust the manufacturer with confidential information about the design and specifications of their products, and it’s likely that the manufacturer wants to keep the specific details of their processes private too. Confidentiality agreements are also better suited to other joint ventures, like acquisitions, mergers and other investment discussions. 

NDA vs confidentiality agreement - which do you need?

Well, it depends. The type of agreement you use to protect your company’s confidential information will vary based on the transaction at hand. 

If multiple parties are disclosing details they’d like to remain confidential, a confidentiality agreement (or mutual NDA) will be most appropriate. However, if the obligation is one-way, a standard NDA is suitable. 

The way an NDA or confidentiality agreement is presented will also vary based on the circumstances. Certain transactions will require a free-standing confidentiality agreement or NDA. Meanwhile, adding a single clause to a broader agreement (like a sales contract or employment contract) will be sufficient in other cases. 

Can you use an NDA and confidentiality agreement together?

While it is possible to use an NDA alongside a confidentiality agreement, it’s generally not necessary. After all, the main difference between the two agreement types is that they were designed for different scenarios. 

However, there may be some instances where NDAs and confidentiality agreements are used in conjunction with one another, like within particularly complex transactions. 

Need help managing your NDAs? 

Poorly drafted and managed NDAs prove costly to businesses, so it’s important to get them right first time. Fortunately, there are two ways to make managing NDAs easier - templates and automation. Try our free Non-Disclosure Agreement template if you're looking to get started, or fill in the form below to automate NDAs in Juro.

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