7 ways to Ensure Confidentiality in Contract Drafting and Protect your Organisation’s Secrets

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As businesses grow, so does the need for confidential information to be exchanged and protected. Drafting contracts with well-defined confidentiality clauses is a crucial part of safeguarding sensitive information.

In this blog post, we will explore the importance of confidentiality in contracts, real-world examples of its applications, and best practices for drafting these clauses. We'll also address frequently asked questions about confidentiality in Contract Drafting.

What is Confidential Information

Confidential Information refers to any sensitive or valuable data that a company or organisation wishes to keep private and secure. This information is not intended to be shared with the general public or competitors and may include trade secrets, financial information, intellectual property, customer data, and other proprietary business information. 

Confidential Information is typically shared between parties under a Confidentiality Agreement or Non-Disclosure Agreement (NDA) to ensure that it remains protected. Maintaining the confidentiality of the information is essential for protecting an organisation's competitive advantage, protecting official or government secrets and sensitive information, preserving the privacy of customers and tenderers, and avoiding legal consequences resulting from unauthorised disclosure.

The Importance of Confidentiality in Contracts

1. Protecting Sensitive Information

Confidentiality is a fundamental aspect of many business relationships. Contracts often include sensitive information, such as trade secrets, business strategies, and financial data. By incorporating confidentiality clauses, the parties can ensure that this information remains protected from unauthorised access or disclosure.

2. Legal Protection

Including confidentiality provisions in a contract can provide legal protection in case of disputes or breaches.

These clauses can help define the responsibilities and consequences for the parties involved, minimising potential damage.

3. Building Trust

Confidentiality clauses help to establish trust between parties, allowing them to share crucial information without fear of it being misused or leaked. This trust is vital to the success of any business partnership.


Example 1: Technology Companies

Two tech companies collaborating on a project may share proprietary software code or hardware designs. By including strict confidentiality clauses in their contracts, they can protect their Confidential Information and prevent competitors from gaining access to their innovations.

Example 2: Mergers and Acquisitions

During mergers and acquisitions, companies exchange a vast amount of sensitive information. This data might include financial reports, customer lists, and business strategies. By incorporating comprehensive confidentiality clauses in their agreements, both parties can ensure that the information remains protected throughout the process.

Best Practices for Drafting Confidentiality Clauses

1. Define Confidential Information

Clearly define the scope of the confidential information in the contract. Be specific about the types of information that should be protected, such as trade secrets, customer lists, or financial data.

2. Specify the Obligations

Outline the obligations of the receiving party to protect the confidential information. This may include limiting access, implementing security measures, and ensuring that the information is not disclosed to third parties without authorization.

3. Set a Time Frame

A confidentiality clause can survive the termination of a contract if it includes a provision that extends the confidentiality obligations beyond the end of the agreement. The duration of this extension should be reasonable and tailored to the sensitivity and nature of the information being protected. 

In some cases, indefinite confidentiality obligations may be appropriate, especially for trade secrets or other highly sensitive information.

If you want to ensure that a confidentiality clause does survive the termination of the contract, you should:

  • specify a time frame during which the obligations apply. This can range from the duration of the contract to a predetermined period after the contract ends (often 7 years in Australia); and
  • expressly state in the contract that the clause survives termination of the contract.

4. Include Exceptions

Identify any exceptions to the confidentiality obligations, such as information that is already publicly available, independently developed, or lawfully obtained from other sources.

5. Address Consequences of Breach

Detail the consequences of a breach of confidentiality, including potential legal remedies such as injunctions or damages.

6. Don't draft too broadly

A confidentiality clause can be deemed unenforceable if it is overly broad, violates public policy, or conflicts with the law in the jurisdiction where it is being enforced.

To minimise the risk of unenforceability, Lawyers should ensure that their confidentiality clauses are reasonable in scope, duration, and the types of information covered. 

7. Ensure the clause or document is legally binding

To ensure that a confidentiality clause or NDA is legally binding, you should:

  • Draft the clause in clear and specific language, outlining the scope, obligations, duration, and consequences of a breach; and
  • Ensure that the confidentiality clause is reasonable and does not violate public policy or the laws of the applicable jurisdiction.


Confidentiality clauses are crucial to protect sensitive information and maintain trust between parties in business relationships. They act as invisible barriers against breaches of trust and safeguard the interests of all involved parties.

However, their effectiveness depends on understanding the nuances and limitations of such clauses and careful drafting in consultation with experienced Lawyers. 

By ensuring that their staff know how to draft tailored confidentiality provisions, organisations can create strong safeguards that ensure the security of their Confidential Information and protect their bottom line. 

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