What is the purpose of a confidentiality agreement?

The purpose of a confidentiality agreement, often referred to as a non-disclosure agreement (NDA), is primarily to protect sensitive information shared between parties during negotiations or within the framework of a business relationship. Such agreements ensure that any proprietary or confidential information disclosed—such as trade secrets, business strategies, or client lists—will not be shared with unauthorized individuals or entities. This protection fosters trust between parties, encouraging open communication and collaboration without the fear of information misuse.

The remaining options focus on aspects that are not aligned with the primary function of a confidentiality agreement. Payment terms are covered in contracts related to services or transactions, while performance evaluations are processes that measure effectiveness, unrelated to the confidentiality of information. Product specifications detail the characteristics or requirements of a product, which does not pertain to the safeguarding of sensitive information. Thus, the second choice highlights the essential role of confidentiality agreements in protecting sensitive information during negotiations.