Legal Guide

Confidentiality Clause – Concept and Remedies

by Shalini Vashistha · 3 min read

Confidentiality Clause

Introduction

When the parties enter into some sort of Contract or Agreement, they share numerous information which is sensitive in nature, and all the information is shared on a trust basis. Basically, a fiduciary relationship ( relationship based on trust) is formed between the parties. So, all the information shared should be confidential. So Confidentiality Clause is included in Agreements or contracts. But first, we have to understand what is Confidential Clause and why it is so important in any Agreement or contract. 

What is a Confidentiality Clause?

Legally binding parties to refrain from sharing any information shared by the parties in the contract or Agreement to a third party or any person outside the said Agreement is a Confidentiality Clause. It is the most normal clause which you can see in an Agreement. To protect their information, most parties include this clause in their Agreement.

Why is the Confidentiality Clause important?

  • Fosters trust

It builds trust between the parties as due to this clause party feels safe.

  • It may affect employment. 

Leaking confidentiality information can clearly put the employment of a party leaking it in danger, so this clause protects it.

  • It stops the abuse of private information. 

No illegal or immoral use can be done of any Confidential information by the parties.

  • It guarantees adherence to the Law.

This clause makes sure that the Law is being followed properly in an Agreement or contract.

  • Fosters self-assurance

Parties get more confident about sharing their sensitive information as breaching this clause leads to fines or punishment or tarnishment of reputation. 

  • It safeguards the reputation.

Where can Confidentiality Clause be seen mostly?

There are three situations where the Confidentiality Clause can be seen most of the time.

  • Attorney-Client Confidentiality

Under this, any information shared by the client with his Attorney. An attorney is bound to keep it confidential and not share it with anyone.

  • Doctor-Patient Confidentiality

Under this, any information is shared by the patient with this doctor. It is the duty of the doctor to keep it confidential.

  • Contract Confidentiality

Under this, a contract is made which includes a Confidentiality Clause and binds the party to leak any information.

Types of Confidentiality

There are two types of Confidentiality, and they are the obligations of confidentiality too.

A mutual NDA is a two-sided confidential Agreement in which both parties are obligated to keep information private for the benefit of the other. In this situation, both parties are obligated to treat the information they receive from one another with the same level of confidentiality as they would treat their own confidential business information.

  • Unilateral Confidentiality

A Unilateral confidentiality Agreement, or unilateral NDA, binds one party to secrecy obligations in the other side’s favor. The obligation of secrecy is due by one party to the other under this kind of Agreement.

Elements of Confidentiality Clause

  • To what extent is the information deemed confidential?
  • It should be mentioned how the party who receives the information should utilize the Confidential information.
  • The objective of the disclosure of Confidential information.
  • A commitment from one party or all parties to keep the information Confidential.
  • Exceptions: When secret information can be released for legal reasons, such as when there is a worry about child safety, when it is necessary to comply with the Law, or when it is necessary for the safety of the public, and what method should be used in these circumstances.
  • What constitutes a breach of confidentiality, and how to file a report?
  • Disciplinary action, dismissal, and maybe legal action are the possible outcomes for violating the confidentiality policy.

Breach of Confidentiality with its Consequences

When private information is revealed to a third party without the owner’s consent, there has been a breach of confidentiality. 

Breach of the Confidentiality Clause can be accidental also, but in whatever way it is, one has to face the consequences of breaching the Confidentiality Clause.

Consequences

  • Criminal Charges can be filed on the party breaching the Confidentiality Clause, and a fine and punishment can be imposed.

When the firm has been significantly harmed by the confidentiality violation, criminal proceedings may be brought. If the breach involves confidential or proprietary information belonging to the firm, it can be considered theft. If theft is confirmed, fines or imprisonment may be imposed. The federal or state governments, depending on the charges, will file the charges; the employer won’t.

  • Lawsuit

To get the court to prevent the party who violated from continuing, the injunctive remedy should be requested. Then, to demonstrate that there has been an irreparable injury, proof of the violation should be acquired. The majority of confidentiality Agreements include wording stating that any breach would be deemed to have irreparable harm.

  • Loss of Trade or Business

Confidentiality Agreements are used to safeguard corporate operations, trade secrets, and other information when companies exchange services with other companies. If there is a breach or violation of the Agreement, it might have a negative impact on the firm’s image and its ability to attract new customers.

  • Tarnished Reputation

A person who violates the Confidentiality Clause risks developing a long-lasting or irreparable poor reputation, which would make doing business impossible. If the guilty individual is employed or hired, any potential employers or clients will view them as a risk.

  • Termination from Employment

The employee confidentiality Agreement will always specify that any violations or breaches will result in termination. Additionally, it will stipulate that monetary damages would be sought.

Conclusion

The confidentiality Clause is the most important clause in any Agreement.

A separate Agreement for confidentiality can also be made, also known as Non- a disclosure Agreement, or in an existing Agreement, a confidential clause can be added. As written above, This clause has many benefits and makes the parties sure and loyal towards each other, as breaching this clause can lead to legal action against them.

In many or every Agreement, this clause can be added, like in Masters Service Agreements, settlement Agreements, Employment Agreements, commercial contracts, etc. So, it can be clearly seen that our legal system makes sure that no party in an Agreement or contract takes advantage of the other or of their information. Get online legal counsel here to learn more about the steps and procedures to protect confidential information or to file for a breach of the same.

Confidentiality Clause in an Agreement have many types, benefits, obligations and one can take the legal action against the other person who breaches this clause, here is the gist of The Confidentiality Clause. To know about the procedure, get online legal advice here.

Shalini Vashistha

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Shalini Vashistha

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