No disclosure: Overview, definition, and example
What is no disclosure?
No disclosure refers to a provision in a contract that prohibits a party from sharing, revealing, or making public certain confidential or proprietary information obtained during the course of their relationship under the agreement. This provision is typically included to protect sensitive information such as trade secrets, business strategies, financial data, or intellectual property. A no disclosure clause is crucial in maintaining confidentiality and ensuring that any information shared between the parties remains private unless otherwise authorized.
This clause may specify that the information must not be disclosed to third parties without express written consent and outline exceptions, such as legal obligations or regulatory requirements, where disclosure may be necessary.
Why is no disclosure important?
No disclosure is important because it helps protect sensitive and confidential information from being exposed or used by unauthorized parties. For businesses, ensuring that confidential information remains undisclosed can be vital for maintaining competitive advantage, safeguarding trade secrets, and preventing reputational damage. This clause is particularly important in agreements such as non-disclosure agreements (NDAs), partnerships, or joint ventures, where the sharing of sensitive information is a key component of the relationship.
For individuals or businesses sharing proprietary knowledge, ensuring the no disclosure clause is in place helps mitigate risks of unauthorized use or leakage of critical information. It also clarifies the legal responsibilities for both parties regarding confidentiality and sets forth the consequences of any breach.
Understanding no disclosure through an example
Imagine a technology company enters into a partnership with another business to jointly develop a new software product. The agreement includes a no disclosure clause that prohibits both parties from revealing any proprietary code, design documents, or business plans related to the software to any third parties without explicit consent. If one of the parties inadvertently shares such information with an external vendor without approval, it would be considered a breach of the no disclosure provision.
In another example, a business is negotiating a merger with another company. During the discussions, each party may share financial records and other confidential details. A no disclosure clause would prevent either party from sharing these sensitive financial documents with outsiders or using the information for personal gain during the negotiation process.
An example of a no disclosure clause
Here’s how a no disclosure clause might look in a contract:
“The Parties agree that they shall not disclose any confidential information obtained during the term of this Agreement to any third party without the prior written consent of the other Party. Confidential information includes, but is not limited to, business plans, financial data, intellectual property, and any other proprietary information shared between the Parties. This obligation shall remain in effect for [insert number of years] after the termination of this Agreement.”
Conclusion
The no disclosure clause is a critical component of many business contracts, as it helps ensure that sensitive information remains confidential and protected from unauthorized access or use. Whether in partnership agreements, employment contracts, or mergers, this clause plays a vital role in safeguarding proprietary information and reducing the risk of legal or financial harm. By including a clear no disclosure provision, businesses can maintain control over their confidential data and protect their competitive advantage.
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.