What's the Difference Between and NDA and a Confidentiality Agreement?

If you need to share information with someone but don’t want it to go any further, you may be thinking about a confidentiality agreement or non-disclosure agreement (NDA). Most often used in business relationships, confidentiality agreements and NDAs are legal contracts that have a similar purpose: to protect information.

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These contracts identify what the confidential information is and outline what happens if someone breaches the contract by sharing the information. The terms are often used interchangeably, but there are some differences. If you're considering a confidentiality agreement vs. an NDA, understanding the distinctions can help you decide which contract to use to protect your information.

What Is an NDA?

An NDA is what’s known as a unilateral contract, meaning it only binds one party. This is why they’re generally used when only one person is sharing a secret. You often hear about NDAs in the world of celebrities. A famous person may ask a personal assistant or other employee to sign one to ensure private conversations don’t end up in tabloids. However, tabloids don't want secrets about the employee, so there’s no need for the celebrity to sign an NDA.

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What Is a Confidentiality Agreement?

Like non-disclosure agreements, confidentiality agreements clearly state what information is private and what happens if someone breaches the contract. These agreements bind all signatories, so they're typically used when everyone is providing confidential data.

For example, when a manufacturer and supplier are considering a business relationship, both have to provide sensitive information. The supplier may have to disclose technical specifications of products, and the manufacturer has to discuss fabrication techniques. A confidentiality agreement ensures neither can discuss this information with an outside party.

What Are the Main Differences Between the Two?

The main difference between a confidentiality agreement and an NDA is who's bound by the contract. In an NDA, only one party has to keep secrets, while a confidentiality agreement ensures everyone who signs must keep the information discussed private.

Some argue that a confidentiality agreement provides more secrecy. A non-disclosure agreement only says the signatory can’t disclose the information, while a confidentiality agreement suggests a more proactive approach to protecting data. However, in most cases, the steps a person has to take to protect information are laid out in the contract, and an NDA can be just as strong as a confidentiality agreement.

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Limitations of Confidentiality Agreements and NDAs

Confidentiality agreements and NDAs are flexible contracts that can be used in a wide range of circumstances. Information commonly protected by these contracts includes details about:

• Mergers
• Acquisitions
• Joint ventures
• Sales
• Employment
• Intellectual property
• Patents

However, there are limitations to these agreements. For example, if one party breaks the agreement and shares information, it can’t be unshared. Contracts list the consequences of breaking an agreement, such as a financial penalty, but the data will still be out there. Generally, the information is also only protected while it remains private. This means if it becomes public knowledge through some other means, such as a data breach, the signatories can then discuss it.

There are also some circumstances when a confidentiality agreement or NDA can’t be used. As legal contracts, these agreements can’t keep illegal activity a secret. They also can’t stop someone from disclosing information that’s of concern to the public. This can include facts related to government transparency or public health and safety.

Your contract can define how long the information must be kept secret, which is typically between one and five years. It’s also possible for the contract not to include an end date, meaning the information must be protected indefinitely. However, some states prohibit time limitations on these agreements, especially in the context of employment.