# Confidentiality Clause

Source: https://contracko.com/clause-library/confidentiality

# Confidentiality Clause

Obliges the parties to protect and not disclose each other's confidential information for a defined period.

## What it is

A confidentiality clause (or standalone NDA) defines what counts as confidential information, how it may be used, who may see it, and for how long the duty lasts. It is the legal backbone for sharing sensitive commercial or technical information.

## Why it matters

Once secrets are out, an injunction or damages rarely restore the value lost. A clear clause defines the obligation precisely, supports trade-secret protection, and is often paired with a penalty to deter disclosure.

## How to apply it

- Define confidential information broadly but exclude public or independently developed data.
- Limit use to the permitted purpose and restrict onward disclosure to need-to-know.
- Set the duration and return/destruction obligations on termination.
- Consider a penalty clause to deter and quantify breaches.

## Sample wording

> Each party shall keep the other's Confidential Information secret, use it solely for the Purpose, and disclose it only to personnel who need to know it and are bound by equivalent confidentiality obligations.

## Negotiation tips

- • Make the obligation mutual and align the duration with how long the information stays valuable.
- • A discloser should add a penalty clause; a recipient should keep standard carve-outs.

## Common pitfalls

- • No carve-out for legally required disclosure, putting the recipient in an impossible position.
- • An indefinite term that is unenforceably broad for ordinary commercial data.

### How Contracko helps

Contracko keeps all your NDAs and contracts containing confidentiality clauses in one searchable repository, so you can instantly find which agreements cover a given category of information or counterparty. Its AI review flags missing carve-outs and undefined scopes before you sign. When confidentiality obligations have a fixed expiry date, Contracko tracks and reminds you, ensuring the duty is honoured or formally extended in time.

## Legal references

- Trade Secrets Protection Act (Wet bescherming bedrijfsgeheimen)
- [BW 6:248 Reasonableness and fairness Dutch law](https://wetten.overheid.nl/BWBR0005289)

Unless marked otherwise, references are to Dutch law (Burgerlijk Wetboek, the Dutch Civil Code); EU instruments such as the GDPR apply across the EU. This is general information, not legal advice. Other jurisdictions treat these concepts differently. Verify the current text and your situation with a qualified lawyer.

## Relevant for

[Software & SaaS](https://contracko.com/industries/software-saas)[Pharmaceuticals & Biotech](https://contracko.com/industries/pharma-biotech)[Consulting](https://contracko.com/industries/consulting)[AI & Data Companies](https://contracko.com/industries/ai-data)[Financial Services](https://contracko.com/industries/financial-services)

## Related clauses

- [Data Processing Clause](https://contracko.com/clause-library/data-processing)
- [Intellectual Property Clause](https://contracko.com/clause-library/intellectual-property)
- [Non-Solicitation Clause](https://contracko.com/clause-library/non-solicitation)

## Related terms

- [Confidential information](https://contracko.com/glossary/confidential-information)
- [Non-disclosure agreement (NDA)](https://contracko.com/glossary/nda)
- [Breach of contract](https://contracko.com/glossary/breach-of-contract)

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## Frequently asked questions

Common questions about this clause.

- **Q:** How long should a confidentiality obligation last?
  **A:** Match it to how long the information stays sensitive, often three to five years, though trade secrets may justify indefinite protection.

- **Q:** Is an NDA different from a confidentiality clause?
  **A:** Functionally no. An NDA is a standalone confidentiality agreement, while a clause is the same duty embedded within a larger contract.

- **Q:** Does a confidentiality obligation survive termination of the contract?
  **A:** Only if the clause states it does. Always include an express survival provision specifying how long the duty lasts after the agreement ends.

- **Q:** What happens when a party is legally ordered to disclose?
  **A:** A well-drafted clause carves out compelled disclosure but requires the disclosing party to give prompt notice and cooperate in seeking a protective order.

- **Q:** Can information shared orally be protected by a confidentiality clause?
  **A:** Yes, if the clause covers oral disclosures, often requiring written confirmation within a set period. Without that, oral information may fall outside the definition of confidential information.

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