Importance of confidentiality clauses in a contract

This articles provides a brief introduction and insight into the importance of confidentiality clauses in contracts and consequences of breach. The article also provides details of the information that needs to be furnished under such clauses.

Thu Jul 21 2022 | Govt. Agencies and Taxation | Comments (0)

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As per the Indian law, confidentiality clause or non disclosure clause in a contract binds  two or more parties or all  involved parties to ensure and agree that specific type of information that is furnished by one party or all the parties will remain confidential. Such clause is included in a contract in case a company or an individual is equipped with a secret idea/process/product/concept, etc.

Key contents in confidentiality clause:

The confidentiality clause must contain the following essentials: 

  1. Mention the names of parties involved in the agreement
  2. Definition of confidentiality in context to the agreement
  3. The tenure of non-disclosure
  4. Exclusions that are not a part of confidentiality
  5. Provisions imposing restrictions upon transfer of data
  6. Terms and condition pertaining to confidentiality
  7. Type of non-disclosure or confidentiality clause
  8. Mention of law and jurisdiction specific to country; in case both the parties are from different countries

Breach of confidentiality clause:

The confidentiality clause is  breached if  either one or both the parties have not maintained the level of privacy and have disclosed it further. In such a case, it is essential to seek legal assistance from a corporate lawyer or legal consultant. 

Redressal mechanism:

Considered as an offence and crime, the law has drafted redressal mechanisms in case of breach of confidentiality clause. The non-breaching party needs to compensate the loss to the other party in the form of monetary compensation. In case of employment, the company can fire the employee or immediately order the  return of company property in case it is bestowed to them. 

Importance of confidentiality clause:

Confidentiality clause plays a vital role when an individual or a company enters into an agreement with other party/parties. It stands out to be an integral element particularly in reseller agreements, license, technology, employment contracts, etc. ¦ The key objective behind including this clause is to ascertain that both the parties involved in the agreement will maintain secrecy and high levels of confidentiality.

 

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