Do you need a confidentiality agreement in your “business” relationship and at what stage in the relationship should this be brought up?
As entrepreneurs we meet a ton of people. We live to network and, in fact, that’s how we obtain many new business relationships. We desire to connect with like-minded people and if they click—boom! business dealings start happening. Well, this brings us to the question of when or if you need a confidentiality agreement between for the relationship.
Now, we want this to be black and white yet, truthfully, it’s not. The answer to this is, it depends. I know it sounds crazy, but it really does depend. There are many factors to business relationships and documents between two parties are no different.
Here’s how you determine your need for an agreement and when to begin thinking about it.
Ask yourself, what’s the nature of your business dealings? If you’re simply networking with another business in line with your brand, there may not be a need for one. If there aren’t detailed dealings maybe an agreement should be used. However, if you’re trading secrets regarding your business and brand then you likely need to discuss confidentiality. You see, the purpose of such a document is to ensure that what’s said between parties stays between parties. In the event that this confidentiality is betrayed there are or can be grave consequences. It’s to make sure pertinent information is kept in a safe and trusted environment, hence confidentiality. I personally believe in document protection (confidentiality agreements, contracts, non-compete clauses, etc.). Why? Because these documents tell us what to do while our mind is stable. When emotions are high, money is tight, attitudes arise, there’s no deciphering what to do because it’s already decided. Another factor to consider is the relationship between parties. How much work has each party done? Remember, a business background and the extent of the relationship and equity matter. How well do you know their business intent and character? How reputable are they?
These are discussions one must have when considering if any agreement should be done. Not everyone will agree with your method of how to do business and not everyone will agree to sign a document, but I encourage every business to have contracts and agreements between one another. Always look at it from a positive perspective. Business owners must understand that contracts and agreements are there for the protection of both parties. If you were to have a business relationship with another party where document drafts are absolutely needed it is best to sit with someone like myself or an attorney who can draft your agreements and ensure the proper clauses and terms are in those documents. It’s not as simple as saying, “Each party agrees to be confidential.” There needs to be an overall logic to the document. The parties need to be identified, purpose, term conditions and stipulations, etc.
I encourage everyone to consider the nature of their business dealings and if there is a need for any documents moving forward.
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