What is a confidentiality clause in a contract?
Confidentiality clause is a contractual provision on the basis of which the parties decide to accept that the information specified by them, indicated in the contract, will be confidential, and therefore cannot be freely available to third parties, under the pain of the consequences specified in the contract.
1. The importance of confidentiality obligations in international contracts
Due to the dynamically developing cooperation of entrepreneurs in the international trade and the growing awareness of the importance of commercial information, entrepreneurs more and more often conclude non-disclosure agreements (so called NDA), or introduce confidentiality clauses into contracts or general contractual conditions.
The purpose of introducing provisions regarding the obligation of confidentiality into the contract is, for example: obliging one or both parties to the agreement to keep confidential information disclosed in the course of performance of the agreement and to regulate the liability of the parties in a case of non-performance or improper performance of the obligation to keep confidential information secret.
2. NDA or confidentiality clause in the contract?
Parties who wish to regulate the obligation of confidentiality have two ways to do it, i.e.: either conclude a confidentiality agreement (the so-called NDA) or include confidentiality provisions in the main agreement (cooperation agreement, General Contractual Terms). Often, non-disclosure agreements (NDAs) are attached to the main agreement that has been concluded between the parties, which is often intended to regulate confidentiality obligations in a more comprehensive manner.
3. What information should be kept confidential?
In the simplest explanation, the obligation of confidentiality should cover information that is actually confidential for a given entrepreneur.
Example: The entrepreneur indicates in the contract that the confidentiality obligation covers information about his clients. At the same time, these entities are disclosed on the website of the indicated entrepreneur in the tab “They trusted us” or “Our customers”. In that case, this kind of disclaimer is completely pointless.
When drafting the content of the confidentiality clause, it is worth taking into account the specificity of a given business and covering information valuable for the entrepreneur, which he would like to protect against a wider audience.
Entrepreneurs often include as confidential information: information of a commercial, organizational, technological, legal, financial nature, information containing personal data and on how to secure personal data, as well as business concepts, marketing strategies, business development plans, know-how, business strategies, as well as other information of economic value, such as the planned budget, various types of reports, information relevant to the protection of intellectual property rights, customer databases and details of contracts concluded with them, as well as information about employees and associates.
4. What provisions should be included in the confidentiality clause?
4.1. Duration of the contract regarding the confidentiality obligation
In the contractual clause regarding the obligation to maintain confidentiality, it is worth specifying how long the parties will be bound by the obligation to keep it. The obligation of confidentiality may bind the parties during the term of the contract, but also after its completion. It is the choice of the parties.
4.2. Sanctions in case of a breach of confidentiality obligations
Contractual confidentiality clauses often contain various types of sanctions in case of failure to comply with the obligation to keep confidential information confidential. These sanctions often take the form of contractual penalties.
4.3 How to deal with confidential information when the contract ends
The clause on the obligation to maintain confidentiality should also regulate the manner of dealing with confidential information after the end of the main contract or even the confidentiality agreement itself. The above means that the parties may agree in the agreement that after the end of its term, all documents and other media containing confidential information will be returned to the disclosing party or destroyed at its request, and also regulate the indicated issue in a more detailed manner.
5. Why is it worth regulating the duty of confidentiality?
Conclusion of a confidentiality agreement with a foreign contractor may protect entrepreneurs against unauthorized disclosure of information about particular economic, financial or technological importance. If, however, unauthorized disclosure of such information occurs, the confidentiality clause may be helpful in enforcing sanctions against the person who committed such a breach. The contractual regulation of the confidentiality obligation will also facilitate the demonstration that a given party was obliged to maintain confidentiality and that the information that was disclosed was confidential.