Entrepreneurship and Small Business (ESB) Certification Practice Exam

What type of agreement is signed by employees to maintain confidentiality about trade secrets?

1. Partnership Agreement

2. Non-Disclosure Agreement

3. Service Agreement

4. Employment Contract

The correct answer is: Non-Disclosure Agreement

A Non-Disclosure Agreement (NDA) is a legal contract that establishes a confidential relationship between parties, often used to protect sensitive information and trade secrets. Employees sign NDAs to ensure that they do not disclose proprietary information learned during their employment to outside parties. This agreement serves to maintain the integrity of a company’s intellectual property and competitive advantage by legally binding employees to confidentiality. In contrast, a Partnership Agreement outlines the terms of a partnership between two or more individuals or entities but does not specifically address confidentiality. A Service Agreement pertains to the terms of services provided by an individual or company, and while it may include confidentiality clauses, it does not focus on trade secrets specifically. An Employment Contract typically outlines the terms and conditions of employment, including responsibilities, remuneration, and duration of employment, but confidentiality regarding trade secrets is more explicitly covered under a Non-Disclosure Agreement. Hence, NDAs play a crucial role in safeguarding trade secrets and sensitive information within the context of employment.