Confidentiality clause
A confidentiality clause is a contract term requiring a party to keep the other side’s nonpublic information secret and use it only for the deal.
What it means
A confidentiality clause sits inside a larger contract, such as a services agreement or partnership deal, and controls what each side can do with the other’s private information. It usually defines what counts as confidential, limits how the information can be used, and says who it can be shared with. Most clauses also list exceptions, such as information that is already public or that the recipient already knew.
Say a freelance marketer signs a services agreement with a retailer and gets access to its sales numbers and customer list. The clause would typically bar the marketer from sharing those numbers or reusing the list for another client. If the marketer breaks it, the retailer can sue for damages and often ask a court to order the disclosure to stop.
Clauses can be one-way, protecting only one party, or mutual, protecting both. They vary a lot in how long the duty lasts: some end a few years after the contract ends, while others last indefinitely for trade secrets. A broad, one-way clause mainly favors the party handing over information, so the recipient has the most reason to check that the obligations are workable.
What to watch for
- Check whether confidential information is limited to material marked or identified as confidential, or covers everything you see or hear.
- Confirm the standard exceptions are there: information that is public, already known to you, independently developed, or received from someone else without restriction.
- Look at how long the obligation lasts after the contract ends, and whether trade secrets are treated differently.
- Make sure you can share information with your own staff, contractors, lawyers and accountants who need it, and with a court or regulator when the law requires.
- See what must happen to the information when the deal ends, such as return or destruction, and whether backups are addressed.
Example clause
Each party will use the other party’s Confidential Information only to perform its obligations under this Agreement and will not disclose it to any third party except its employees and advisors who need to know it and are bound by confidentiality duties at least as protective as these. These obligations continue for three years after this Agreement ends, and for as long as the information remains a trade secret.
Both sides must keep each other’s information private and use it only for this deal, for three years after it ends and longer for trade secrets.