Confidentiality clauses

Authored by the LexisNexis Legal Writer team.

One or both parties to a commercial agreement will often disclose confidential information to the other to enable the parties to perform their obligations under the agreement and implement the arrangements or undertake the transactions that the agreement contemplates. Such information can include commercially valuable and sensitive information such as trade secrets, know-how, research, client and customer information, and other legal, commercial or financial information.

The purpose of a confidentiality clause is to protect the confidentiality of the parties’ confidential information by:

• imposing express contractual confidentiality obligations on the parties in relation to that information; and
• setting out a regime regulating how the parties can use (or not use) each other’s confidential information, including how such information must be stored and disposed of, and in what circumstances it may be disclosed.

This can limit the risk of a party’s valuable and sensitive information being misused by another party and/or falling into the hands of competitors who could exploit that information.

In some circumstances, parties will disclose confidential information to each other in the preliminary or due diligence stages of a proposed arrangement and before they enter into a formal agreement to document that arrangement.