A Canadian Confidentiality Agreement is a legally binding contract that protects trade secrets, proprietary business information, and other sensitive data shared between parties in a commercial relationship. Unlike the United States — which enacted the Defend Trade Secrets Act (2016) as a federal trade secret statute — Canada has no dedicated federal or provincial trade secret legislation. Instead, trade secret protection in Canada relies on a combination of contractual obligations (confidentiality agreements), the common law duty of confidence, and equitable remedies.

The common law duty of confidence, established in cases such as Lac Minerals Ltd. v. International Corona Resources Ltd., [1989] 2 SCR 574, requires three elements: the information must have a quality of confidence, it must have been communicated in circumstances importing an obligation of confidence, and there must be unauthorized use of the information to the detriment of the party who communicated it. A confidentiality agreement strengthens this protection by clearly defining what constitutes confidential information, the permitted uses, and the remedies for breach.

Where personal information is involved, the Personal Information Protection and Electronic Documents Act (PIPEDA, S.C. 2000, c. 5) imposes additional obligations on the receiving party regarding the collection, use, and disclosure of personal data. Provincial privacy legislation — Alberta's PIPA, British Columbia's PIPA, and Quebec's Act respecting the protection of personal information in the private sector — may also apply. A confidentiality agreement should align with these privacy requirements to avoid creating a situation where contractual obligations conflict with statutory privacy duties.

A Canadian Confidentiality Agreement is needed whenever one party will disclose proprietary business information to another in the course of a commercial relationship. The most common scenario is during pre-transaction due diligence — when a business is being acquired, a potential buyer needs access to financial records, customer lists, supplier contracts, and operational data before the deal closes. Without a confidentiality agreement, the potential buyer could walk away from the deal and use the disclosed information to compete against the seller.

This document is essential when hiring employees, contractors, or consultants who will have access to trade secrets — product formulas, manufacturing processes, algorithms, pricing strategies, or client databases. The agreement prevents these individuals from using or disclosing the information during and after the engagement. Technology companies sharing source code, API specifications, or product roadmaps with potential partners, integrators, or investors must have confidentiality protection in place before any disclosure.

Joint venture negotiations, franchise discussions, licensing talks, and strategic partnership explorations all require confidentiality agreements before the parties exchange business-critical information. Businesses sharing personal information of their customers or employees with third-party service providers must ensure the receiving party's confidentiality obligations align with PIPEDA requirements.

Without a confidentiality agreement, the disclosing party must rely solely on the common law duty of confidence — which requires proving that the information had a quality of confidence and was shared in circumstances importing confidentiality. A written agreement eliminates this evidentiary burden by clearly establishing the parties' obligations.

A comprehensive Canadian Confidentiality Agreement must identify the disclosing party and the receiving party (or both parties if the agreement is mutual), with full legal names, business registration numbers, and addresses. The agreement should specify whether it is unilateral (one party discloses, one receives) or mutual (both parties exchange confidential information).

The definition of confidential information is the most critical clause. It should be broad enough to capture all sensitive information — trade secrets, financial data, customer and supplier lists, business plans, technical specifications, source code, marketing strategies, and employee information — while being specific enough that a court can determine what is covered. Include a list of exclusions: information that is or becomes publicly available through no fault of the receiving party, information the receiving party already possessed, information independently developed without use of the confidential information, and information received from a third party without confidentiality restrictions.

The permitted use clause should restrict the receiving party to using the information solely for the stated purpose (evaluating a potential transaction, performing contracted services, etc.) and prohibit all other uses. Include obligations regarding the standard of care (at least the same care the receiving party uses for its own confidential information, but not less than reasonable care), restrictions on disclosure to third parties (limited to employees and advisors on a need-to-know basis who are bound by similar obligations), and a compelled disclosure exception (court order, regulatory requirement, or government subpoena — with notice to the disclosing party where legally permitted).

The return or destruction of materials clause should require the receiving party to return or destroy all confidential information and copies upon request or termination of the agreement. The survival period — how long confidentiality obligations last after the agreement ends (typically two to five years, or indefinitely for trade secrets) — must be specified. Include an equitable remedies clause acknowledging that monetary damages may be inadequate and that the disclosing party is entitled to seek injunctive relief. Both parties must sign, with a governing law clause referencing the applicable Canadian province.