You have a negotiation starting, a supplier meeting lined up, or a potential investor coming in. Someone will need to see sensitive information before any deal is done. A counterparty sends you a confidentiality agreement — or your lawyer asks you to sign one — and suddenly you are deciding whether to sign something you have not read closely, or to push back on clauses you cannot quite evaluate.
A one-way (or unilateral) confidentiality agreement — also called a non-disclosure agreement or NDA — is the version used when only one side is sharing sensitive information. The disclosing party hands over the information; the receiving party is bound to protect it. It does not create a joint venture, assign intellectual property, or commit anyone to a transaction. Its sole job is to control what the receiving party can do with what they learn.
How confidential information is defined
The definition clause is the engine of the whole agreement. Get it wrong and the rest of the document does not matter.
The definition needs to be broad enough to catch everything you plan to share — and anything that might come up as the discussions develop. Common categories include:
- technical information, inventions, and research and development material
- trade secrets and proprietary processes
- financial data: margins, projections, pricing, customer terms
- marketing plans, sales strategies, and client lists
- details of potential products or services not yet public
Three drafting choices sit inside this clause:
- Written vs. all formats. A definition limited to written material leaves oral briefings, site tours, and whiteboard sessions unprotected. If you will be sharing anything verbally or by demonstration, the definition must say so explicitly.
- Marking requirements. Some agreements require the disclosing party to stamp or label information "Confidential" at the time of disclosure. This creates administrative discipline but also creates a gap: anything not marked is arguably unprotected. If you include a marking requirement, add a catch-all for information that is obviously confidential by its nature even if not labelled.
- Breadth and restraint of trade. Australian courts have held that an overly broad definition — one that purports to protect information already in the public domain, or information with no real confidential character — can be read down or, in egregious cases, treated as an unreasonable restraint of trade. Draft the definition to capture genuinely sensitive material, not everything that passes between the parties.
What the other side will push for: A narrower definition, limited to written materials marked "Confidential" at the time of disclosure. Whether that is acceptable depends on how much you are sharing verbally.
The permitted purpose
The receiving party is not simply prohibited from publishing your information — they are permitted to use it, but only for a specified purpose. The permitted purpose clause is what keeps that use within bounds.
A well-drafted permitted purpose is narrow enough that the receiving party cannot use what they learn for any project or opportunity outside the one you are discussing, but not so restrictive that they cannot properly evaluate the deal or transaction on the table. An example: "for the sole purpose of evaluating a potential acquisition of the business operated by the Disclosing Party."
The trap to watch for: A vague permitted purpose — "for the purposes of discussions between the parties" — gives the receiving party significant room to argue that their use was within scope. Be specific about the transaction or project.
Confidentiality obligations
Once you have defined what the information is and what it can be used for, you need to say what the receiving party must actually do. The obligations clause should cover:
- a general duty to keep the information confidential and not disclose it to any person without the disclosing party's prior written consent
- a duty to use the information only for the permitted purpose
- a duty to take reasonable steps to protect the information from unauthorised access or disclosure — at least the same steps the receiving party takes with its own confidential information
- a restriction on copying or reproducing the information beyond what is strictly necessary for the permitted purpose
Third-party disclosure. In almost every real negotiation, the receiving party will need to show the information to someone else: their accountant, a due diligence lawyer, an investor, or a key employee. The obligations clause should set out who is an authorised recipient, require those recipients to be bound to equivalent confidentiality obligations (usually by signing their own agreement or a deed poll), and make the receiving party responsible for any breach by its authorised recipients.
Return or destruction. If negotiations end, you should be able to require the receiving party to return or destroy all copies of the information. Include a clause that sets out how that is done and requires the receiving party to certify in writing that it has complied.
How long the obligations last
Confidentiality obligations do not last forever, and attempting to make them perpetual can create enforceability problems. The duration clause specifies when the obligations end.
- During negotiations: Obligations should apply from the date of execution.
- After negotiations end: If the deal does not proceed, the obligations should continue for a defined period. A term of two to three years from the date of the agreement, or from the date negotiations formally end, is a commonly used range — but what is appropriate will vary by industry, the sensitivity of the information, and how quickly it becomes stale or publicly available.
- Survival: Even if the parties enter into a further agreement (a sale agreement, a services agreement, a joint venture), the confidentiality obligations under the NDA should survive unless expressly superseded.
What the other side will push for: A shorter duration, or obligations that end automatically once the dealing relationship begins. Both of those positions are worth resisting.
No commitment to transact
Sharing information does not mean either side is committed to a deal. The no-commitment clause — sometimes called a non-binding clause or disclaimer of obligations — makes that explicit: disclosing information imposes no obligation on either party to enter into negotiations, continue negotiations, or conclude any transaction.
This clause protects both sides. The disclosing party is not locked into selling or licensing something simply because they showed a prospective buyer around. The receiving party is not locked into buying. Either side can walk away at any time without liability, provided they comply with the confidentiality obligations they have already signed up to.
Watch for: Agreements that omit this clause, or that include pre-contractual commitments elsewhere in the document that cut across it.
Remedies for breach
The remedies clause sets out what happens if the receiving party discloses or misuses the confidential information.
- Damages. A breach of a confidentiality agreement is a breach of contract, which gives the disclosing party the right to claim compensation for the loss caused. Proving loss is not always straightforward — particularly where the harm is reputational or competitive rather than a direct financial loss.
- Injunctions. Where the breach is continuing — or about to happen — monetary compensation is often inadequate. Australian courts can grant injunctions, including urgent interlocutory injunctions, to restrain a party from disclosing or continuing to use information in breach of a confidentiality agreement. Injunctions are typically the remedy that matters most in practice, because they stop the harm rather than compensating for it after the fact.
- Account of profits. In some circumstances, particularly where the breach has been exploited commercially, a court may order the wrongdoer to account for the profits made from the misuse of the information.
The remedies clause should acknowledge that breach will cause irreparable harm and that the disclosing party is entitled to seek injunctive relief without needing to prove damages — this language reinforces the argument for urgent relief when it is needed.
Optional and situational clauses
Depending on the transaction, you may also want to consider:
- Exclusions from the definition. Most NDAs carve out information that is already in the public domain, was already known to the receiving party, or is independently developed — without reference to the disclosed information. These exclusions are standard and reasonable, but the drafting needs to be tight: the receiving party should bear the burden of proving an exclusion applies.
- No reverse engineering. If the information relates to technology or products, a clause prohibiting the receiving party from using it to reverse-engineer or replicate the disclosing party's offering adds an extra layer of protection.
- Residuals limitation. Some receiving parties, particularly sophisticated commercial counterparties, will seek a "residuals" clause allowing their personnel to use anything retained in unaided memory without reference to documents. Resist this clause if you can — it significantly limits your ability to enforce the agreement.
- Non-solicitation. If the receiving party will be meeting your key employees or contractors as part of the discussion process, a non-solicitation clause prevents them from approaching those people during and for a period after negotiations.
- Compelled disclosure carve-out. If a receiving party is compelled by law or court order to disclose the information, the agreement should require them to give you as much notice as possible so you can seek a suppression order or other protection before disclosure occurs.
How Artificer Legal can help you get this right
A confidentiality agreement looks straightforward on the page. The disputes that arise from poorly drafted ones are rarely straightforward. When Artificer Legal reviews or drafts a one-way NDA, here is what we focus on:
On the disclosing party's side, we push for a broad definition of confidential information that covers all formats and does not depend on labelling, a narrow and specific permitted purpose, obligations that extend to authorised recipients, and a remedies clause that explicitly supports injunctive relief. We also check that the duration is appropriate for the type of information and the industry.
On the receiving party's side, we look for a definition that is not so broad it catches information already in the public domain, a permitted purpose that reflects what you actually need to do with the information, and a reasonable duration rather than a perpetual obligation. We push back on clauses that make you responsible for breaches by people entirely outside your control.
What we negotiate first: The definition and permitted purpose clauses. Getting those right constrains every other dispute that might arise. A well-drafted definition makes the obligations clause largely self-executing; a vague one turns every subsequent clause into an argument.
The definition of confidential information
If there is one clause that tends to determine who wins when a confidentiality agreement ends up in dispute, it is the definition of confidential information — not the remedies clause, not the duration. A definition that is too narrow leaves genuinely sensitive information unprotected. One that is too broad gives the receiving party easy arguments about public domain and restraint of trade. The definition is also the clause most likely to be drafted hastily, using a generic template that does not reflect what you are actually sharing.
To summarise: a one-way confidentiality agreement protects the disclosing party by defining exactly what information is covered, confining the receiving party to a specific permitted purpose, imposing clear obligations (including on authorised third parties), setting a defined duration, confirming that no transaction commitment arises from sharing information, and providing appropriate remedies — particularly injunctive relief — if the agreement is breached. Each of those elements is a drafting decision, not a formality.