Disclosure of information: Overview, definition, and example
What is disclosure of information?
Disclosure of information refers to the process of sharing specific facts, data, or details with another party, typically as required by a contract, regulation, or legal obligation. Disclosure clauses in contracts often define what information must be shared, the timing of the disclosure, and any confidentiality protections that apply.
For example, in a merger agreement, the seller might be required to disclose financial records, pending litigation, or other material facts to the buyer during due diligence.
Why is disclosure of information important?
Disclosure of information is important because it ensures transparency, builds trust between parties, and provides critical data for informed decision-making. It helps avoid misunderstandings, mitigate risks, and ensure compliance with legal or contractual obligations.
For businesses, proper disclosure of information reduces the risk of disputes, enhances credibility, and ensures that agreements are based on accurate and complete facts. Failure to disclose material information can lead to legal consequences, reputational damage, or financial losses.
Understanding disclosure of information through an example
Imagine a company negotiating a supply agreement with a manufacturer. The manufacturer is required to disclose information about the origin of raw materials and any compliance certifications. This allows the company to ensure that the materials meet its quality and regulatory standards before finalizing the agreement.
In another example, a company raising funds from investors includes a disclosure clause in the investment agreement. The clause requires the company to provide accurate information about its financial condition, pending litigation, and other material factors that could impact the investment decision.
An example of a disclosure of information clause
Here’s how a disclosure of information clause might look in a contract:
“Each Party agrees to provide the other Party with all material information relevant to the performance of this Agreement. Any disclosures required under this clause shall be made in writing and delivered within [Insert Timeframe]. Both Parties agree to keep disclosed information confidential in accordance with the terms outlined in Section [Insert Reference].”
Conclusion
Disclosure of information promotes transparency and accountability in contractual relationships by ensuring that all relevant facts are shared. It helps parties make informed decisions, reduces risks, and enhances trust and collaboration.
By including clear disclosure of information clauses in agreements, businesses can ensure compliance, foster stronger partnerships, and minimize the potential for disputes or misunderstandings.
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.