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Confidentiality and restrictions

Confidentiality clause: meaning and sample wording

A confidentiality clause obliges a party to keep the other party's non-public information secret, use it only for the purpose of the contract, and share it only with people who need to know it.

When to use it

Include one in any contract where either side will see non-public information: services, consulting, employment, contractor and partnership agreements. When there is no other contract yet, a standalone NDA does the same job.

Sample confidentiality clause

Each party (the "Recipient") shall keep confidential all information disclosed to it by the other party (the "Discloser") that is marked as confidential or would reasonably be understood to be confidential ("Confidential Information"). The Recipient shall use Confidential Information only to perform its obligations or exercise its rights under this Agreement, and shall disclose it only to its employees, officers, professional advisers and subcontractors who need to know it for that purpose and who are bound by confidentiality obligations no less protective than this clause.

These obligations do not apply to information that (a) is or becomes publicly available other than through the Recipient's breach, (b) was lawfully in the Recipient's possession before disclosure, (c) is lawfully received from a third party without restriction, or (d) is independently developed without use of the Confidential Information. The Recipient may disclose Confidential Information to the extent required by law or a court, after giving the Discloser prompt notice where legally permitted.

These obligations continue for three (3) years after this Agreement ends, and for trade secrets, for as long as the information remains a trade secret.

What to check

  • What counts as confidential"Marked as confidential" is easy to prove but easy to forget. "Would reasonably be understood to be confidential" catches unmarked information, such as things said in meetings.
  • The standard exclusionsPublic information, information already known, information received from others and independent development are the four exclusions almost every clause includes.
  • DurationTwo to five years is common for business information. Trade secrets are usually protected for as long as they stay secret.
  • Whistleblowing and legal carve-outsMany laws protect people who report wrongdoing to regulators, and a clause that tries to prevent that may be unenforceable. In the United States, employers must give employees and contractors a whistleblower immunity notice under the Defend Trade Secrets Act to recover certain damages.

Make the variable parts fill themselves in

In a Word template, replace the details that change with {tags} and wrap optional wording in a section. Clausery turns them into questions, so each document only includes the parts that apply:

{#include_standard_exclusions}
These obligations do not apply to information that is or becomes public other than through the Recipient's breach, was already lawfully known to the Recipient, or is independently developed.
{/include_standard_exclusions}
These obligations continue for {confidentiality_years} years after this Agreement ends.

Paste this into your own template, then check it with the free template tag checker or read the template syntax.

Questions

Is a confidentiality clause the same as an NDA?

It does the same job. An NDA is a standalone agreement, usually signed before a deal. A confidentiality clause sits inside a larger contract, such as a services or employment agreement.

How long should confidentiality last?

Long enough for the information to lose its value. Two to five years suits most commercial information; trade secrets need protection for as long as they remain secret.

Can I use this sample wording as it is?

It is a general starting point. Contract law differs between countries and states, and the right wording depends on the deal, so have it reviewed before you rely on it.

Free templates that use it

Related clauses

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This page is general information, not legal advice. Laws differ between countries and states; have wording reviewed for your situation before you rely on it.