Confidentiality of Relationship
Contract Type:
Generic Contract
Jurisdiction:
Each party undertakes that it shall not at any time disclose to any person any confidential information concerning the business, affairs, customers, clients or suppliers of the other party, except as permitted by this clause. Each party may disclose the other party's confidential information: (a) to its employees, officers, representatives, subcontractors or advisers who need to know such information for the purposes of carrying out the party's obligations under this agreement. Each party shall ensure that its employees, officers, representatives, subcontractors or advisers to whom it discloses the other party's confidential information comply with this clause; and (b) as may be required by law, a court of competent jurisdiction or any governmental or regulatory authority. Neither party shall use the other party's confidential information for any purpose other than to perform its obligations under this agreement.
Explanation
Here is a plain English explanation of the Confidentiality of Relationship clause:
This clause prevents both parties from disclosing the other's confidential business information to any outside person, except as allowed.
Confidential information covers things like business dealings, customers, clients, and suppliers.
The parties can share the information internally with employees, contractors, advisors etc. who need it to perform contract duties. But they must ensure these people also maintain confidentiality.
Disclosure is allowed when required by law, courts or regulators.
The confidential information can only be used to carry out obligations under the contract.
In summary, this clause imposes a mutual duty to keep each other’s sensitive business information secret.
Limited internal sharing is permitted for contract purposes. External disclosure is only allowed when legally required.
The confidentiality of relationship clause emerged in the early 20th century as companies sought to protect business secrets shared between contractual partners.
Its key historical developments include:
Early court rulings found implied duties to maintain confidentiality of trade secrets or other proprietary information exchanged within certain partnerships, joint ventures and vendor relationships. But the scope was uncertain.
Companies began expressly defining protected categories of confidential information in contracts. This provided more clarity than vague common law understandings of what constituted a "trade secret."
Confidentiality clauses also specified need-to-know internal sharing with employees or advisors involved in the relationship. This permitted necessary disclosures while preventing widespread leaks.
Carve-outs for legally mandated disclosures established boundaries to prevent obstruction of justice or regulatory duties.
Overly broad confidentiality came under scrutiny as restraints of trade. So contractual protections focused on competitively sensitive intellectual property and business data.
Technology growth increased reliance on external vendors and development partnerships. Customized confidentiality clauses became crucial for protecting proprietary information in complex collaborations while allowing necessary sharing.
Modern confidentiality of relationship clauses derive from early 20th century pioneering efforts to contractually define and govern commercial information flows between interconnected but independent entities.
In summary, this clause evolved to facilitate proprietary information sharing in business collaborations while mitigating trade secret risks.
.webp)
