Confidentiality Clause
A contractual provision requiring one or both parties to keep designated information secret and not disclose it to third parties without authorization.
While straightforward in theory, many businesses fail to actively track obligations tied to this concept - often resulting in missed deadlines, unintended renewals, penalties, or loss of contractual rights.
US Law · For business owners and foundersWhat is a Confidentiality Clause?
A confidentiality clause (also called a non-disclosure clause or NDA clause) is a contractual provision that obligates one or both parties to protect certain information from unauthorized disclosure. The clause defines what information is "Confidential Information," how it must be protected, what the permitted uses are, and what happens if it is disclosed without authorization. It is the same substantive protection as a standalone NDA, but embedded within a broader agreement.
A unilateral confidentiality clause protects only one party's information (e.g., a vendor protects the client's data). A mutual confidentiality clause - more common in partnerships and M&A negotiations - protects both parties' information equally. The scope should match the actual flow of information: if only one party is disclosing sensitive information, a unilateral clause suffices.
Every well-drafted confidentiality clause includes carve-outs where disclosure is permitted: (1) information that was already publicly known; (2) information the receiving party already knew before disclosure; (3) information independently developed by the receiving party; (4) information received from a third party without confidentiality obligations; and (5) disclosures required by law, regulation, or court order (with notice to the disclosing party if permitted).
In practice, many teams rely on a contract expiry tracking system to stay on top of dates and obligations tied to clauses like this.
Key Elements
Definition of Confidential Information
Clearly identifies what information is protected - often defined broadly (all non-public business information) or specifically (certain documents marked "Confidential").Permitted Use Restriction
Limits how the receiving party may use Confidential Information - typically only for purposes of the agreement, not for competitive purposes.Standard of Care
Requires the receiving party to protect Confidential Information using at least the same care as their own confidential information, but no less than reasonable care.Survival Clause
Specifies how long the confidentiality obligations survive after the contract ends - typically 2–5 years for business information, indefinitely for trade secrets.Real-World Example
A software company shares its proprietary source code with a prospective acquirer during due diligence. The acquisition falls through. The prospective acquirer's engineering team later builds a competing product using design concepts from the reviewed source code.
The prospective acquirer breached the confidentiality clause (or NDA) by using the disclosed information for a purpose other than evaluating the acquisition. The software company can seek injunctive relief to stop use of the misappropriated concepts and damages for the harm caused. The breach also potentially constitutes trade secret misappropriation under the DTSA.
This is why many businesses adopt automated deadline tracking to ensure no critical dates are missed before they pass.
Sample Clause Language
Mutual Confidentiality ClauseWatch Out For
Marking Requirements
Some confidentiality clauses require information to be marked "Confidential" to receive protection. Failing to mark documents can result in losing protection for sensitive information. Consider broader definitions that don't require marking.Residuals Clauses
Some NDA/confidentiality clauses include a "residuals" clause - permitting the receiving party to use information retained in unaided memory (in their head). This is a significant carve-out that can substantially weaken protection.Injunctive Relief Provision
Include an express acknowledgment that breach of confidentiality will cause irreparable harm and that injunctive relief is appropriate without bond - this streamlines enforcement if a breach occurs.Don't let confidentiality clause deadlines catch you off guard
Key dates tied to confidentiality clauses - renewal windows, expiry cutoffs, notice periods - can easily slip through the cracks when tracked manually. Missing them triggers automatic extensions, penalties, or lost rights. ExpiryEdge tracks every critical deadline and sends automated reminders before they're due - so nothing slips.
Instead of relying on spreadsheets or manual follow-ups, a centralized renewal reminder system ensures every deadline is visible, tracked, and actioned automatically.
How to Use This in Your Favor
Broad Definition + Specific Examples
Draft Confidential Information broadly ("all non-public information") but include specific examples of what is covered (source code, customer lists, financial projections, pricing) to leave no doubt about what is protected.Survival Beyond Termination
Always include a survival clause - confidentiality obligations should expressly survive termination of the contract for a defined period, and indefinitely for trade secrets.Related Terms
Frequently Asked Questions
How long does a confidentiality clause last after the contract ends?
It depends on the contract. Most business confidentiality clauses survive for 2–5 years after termination. Trade secret obligations should survive indefinitely, as trade secrets have no expiration date.
Can I be required to disclose Confidential Information by a court order?
Yes - legal process (subpoena, court order) typically overrides confidentiality obligations. However, well-drafted clauses require you to promptly notify the disclosing party so they can seek a protective order before disclosure occurs.
Does a confidentiality clause protect oral disclosures?
Only if the clause expressly covers oral disclosures. Some clauses require oral disclosures to be followed by written confirmation within a set period to be protected. Broader definitions protect oral disclosures automatically.