Confidentiality undertaking: Overview, definition and example
What is a confidentiality undertaking?
A confidentiality undertaking is a legal commitment made by one party to keep certain information private and not to disclose it to third parties without permission. This type of agreement is often included in contracts when sensitive or proprietary information is being shared between parties. The undertaking ensures that the receiving party will safeguard the information and use it only for the purposes specified in the contract.
Why is a confidentiality undertaking important?
A confidentiality undertaking is important because it protects sensitive business information, such as trade secrets, financial data, or client details, from being exposed or misused. It creates a legally binding obligation for the party receiving the information to maintain privacy, which can help prevent competitive disadvantage, reputational damage, or legal liabilities. For businesses, it ensures that confidential information remains secure and that the disclosing party can trust that their proprietary knowledge will be protected.
Understanding a confidentiality undertaking through an example
Imagine a company hires a consultant to assist with a new product launch. The company shares its marketing strategy and product design, both of which are confidential. To ensure these details remain private, the consultant signs a confidentiality undertaking, agreeing not to share the information with anyone else. If the consultant later leaks the information to a competitor, they would be in breach of the undertaking, which could lead to legal action.
In another example, a business owner sells their company to a new buyer but requires the buyer to sign a confidentiality undertaking before discussing key business information. The buyer agrees not to disclose any information about the business to other parties before the deal is finalized, protecting both the seller’s and buyer’s interests.
Example of a confidentiality undertaking clause
Here’s how a confidentiality undertaking clause might appear in a contract:
“The receiving party agrees to maintain the confidentiality of any proprietary or confidential information disclosed during the term of this agreement. The information shall not be shared with any third parties without the prior written consent of the disclosing party.”
Conclusion
A confidentiality undertaking is an essential tool for protecting sensitive information in business relationships. It ensures that the parties involved maintain the privacy of confidential data and prevents unauthorized disclosures. By including a confidentiality undertaking in contracts, businesses can safeguard their valuable information and reduce the risk of breaches that could harm their operations or reputation.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.