Drafting a confidentiality agreement: what should be included

Drafting a confidentiality agreement involves clearly defining six components: who the parties are, what constitutes confidential information, for what purpose the recipient may use it, which exceptions apply, how long the confidentiality lasts, and what the consequences are in the event of a breach. The biggest mistake is an overly vague definition of confidential information—in which case the agreement is difficult to enforce retrospectively. Below are the building blocks and pitfalls to avoid when drafting.

The short answer

• Parties: provider and recipient, with the correct legal form.
• Definition: what exactly is confidential information.
• Purpose: for what purpose the recipient may use the information.
• Exceptions: what is not covered by confidentiality.
• Duration: term of agreement and duration of confidentiality, separately.
• Penalty: a realistic penalty clause for enforcement.

Start with the parties and the goal

Name the parties in full: name, legal form, and Chamber of Commerce number. Determine whether the NDA is unilateral (one party shares) or reciprocal (both share). Next, define the purpose: for what may the recipient use the information? For example, “exclusively for assessing a potential collaboration.” Without a purpose limitation, the recipient can formally use the data for anything, as long as they do not share it.

The definition of confidential information

This is the most important article. A good definition is concrete enough to enforce and broad enough to cover what you share. Work with categories instead of a list of separate documents:

• Financial data: figures, prices, margins, budgets.
• Commercial data: customer and supplier lists, contracts.
• Technical data: designs, source code, recipes, methods.
• Strategic data: plans, acquisitions, product development.

Consider a marking rule: written documents designated as “confidential,” and oral information confirmed in writing within a short period. That is strict, but it prevents disputes about what did and did not fall under the agreement.

The exceptions

Without exception, an NDA becomes unreasonable. Include as standard that confidentiality does not apply to information that:

• was already public or becomes public through no fault of the recipient;
• already lawfully knew the recipient prior to the provision;
• the recipient received from a third party who did not breach confidentiality;
• must be provided pursuant to law or court order (with a prior notification requirement).

Permitted sharing within one's own organization

The recipient often needs to be able to share the information internally in order to use it. Stipulate that this is only permitted with individuals who genuinely need the information (need to know) and who are themselves bound by confidentiality. Think of employees, advisors, and the accountant. This ensures the circle remains controlled without the agreement becoming unworkable.

Duration, refund and end

Rule three things separately. The duration of the agreement (for example, for the duration of the negotiations). The duration of the confidentiality, which almost always extends longer — two to five years, or indefinitely for genuine trade secrets. And what happens to the information after expiration: the return or destruction of all documents and copies, at the request of the provider.

The penalty clause

Because damage caused by a leak is difficult to prove, a penalty clause is usually included. Make this realistic: a fixed amount per violation, possibly supplemented by an amount per day that the breach continues. An absurdly high penalty is counterproductive — a judge can reduce it. Also specify whether you can claim actual damages in addition to the penalty; otherwise, the penalty serves as a substitute for compensation.

Do not forget the final provisions

Conclude with the standard clauses that really matter:

• Applicable law (Dutch law) and competent court.
• No obligation to a deal: the NDA does not in itself lead to a collaboration.
• Changes only in writing.
• Relationship to other agreements, such as a confidentiality clause in an ongoing contract.

Honest recommendation

For a straightforward situation, you can easily draft an NDA yourself using a sound template: simply adjust the parties, purpose, definition, duration, and penalty clause to your specific case, and you are all set. You do not need a lawyer for this. However, it is wise to seek assistance if it concerns an acquisition, unique intellectual property, foreign parties, or when the other party presents their own NDA that you cannot properly assess. The risks almost always lie in three areas: an overly vague definition, an unsuitable duration, and an incorrect penalty clause.

Ready to get started? Use the confidentiality agreement, first see exactly what a confidentiality agreement is , and view the key clauses in an example.

Frequently Asked Questions