A disclosure agreement commits individuals or organizations to share specific information with other parties, with limits on what must be shared. They are common in real estate, investments, and employment, and failure to comply can result in legal consequences.
A disclosure agreement is a document that commits an individual, business, or other type of organization to disclose or share specific types of information with other parties to the agreement. In many countries, the scope of information that may be required as part of a formal disclosure contract is governed by disclosure regulations set by government agencies. In general, any type of disclosure agreement will place limits on the type of information that must be shared, limiting the disclosure process to only data deemed essential to the successful completion of the project that brought the parties together.
A common example of how a disclosure agreement works can be found in the real estate industry. In most countries, sellers are required to disclose specific facts regarding the properties they are placing on the market. This includes information about the general condition of any structures on the property, issues related to soil toxicity, or any other issues buyers need to be aware of in order to make an informed property purchase decision. Failure to comply with the disclosure terms required by law can result in a voided sale, fines imposed by government agencies, and even the possibility of a civil lawsuit filed by the buyer.
The concept of a disclosure agreement is also common with investment opportunities. In the case of bond issues, the entities issuing the bonds must provide potential investors with specific information that is considered relevant to the assessment of the earnings potential of the bond issue. If a municipality creates a bond issue to raise money to pave streets in a new residential area, the city or town must provide details about how the purchase price of the bonds will be paid, what may happen to the issue if the project is abandoned for some reason, or what would happen if unforeseen delays occurred. By considering these various outcomes, an investor can decide if issuing bonds is a good idea, or if he or she would be more comfortable investing in other types of securities.
Even in employment situations, there is usually a disclosure agreement that commits the applicant to disclose certain types of information about education, criminal records, and other key aspects of their background. At the same time, the employer is often prohibited from asking for information such as religious preference or sexual orientation as part of the disclosure process. If the employer later discovers that an employee failed to disclose information specifically required by the terms of the disclosure document, disciplinary action may be taken, up to and including termination of employment.
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