What Are the Differences Between Confidentiality and Privacy Clauses?

In Short

• Confidentiality clauses require one or both parties to keep specific information confidential.

• Privacy clauses impose obligations under the Privacy Act to protect personal information.

• Understand your obligations and negotiate contract terms to protect your business.

Tips for Businesses
Ensure you clearly understand your contract’s confidentiality and privacy obligations. Negotiate a two-way confidentiality clause if disclosing information, and review any exceptions. For privacy clauses, ensure compliance with the Privacy Act, particularly if you handle personal data. Seek legal advice to confirm compliance with all applicable laws.

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Table of Contents

• What Is a Confidentiality Clause?
• What Is a Privacy Clause?
• Key Takeaways

If you have received a contract from a client, it likely includes confidentiality and privacy clauses. Both clauses deal with your obligations on using and disclosing information – so what is the difference?

It is important you understand your obligations under the contract so you can properly comply with it. This article will explain the difference between confidentiality clauses and privacy clauses and provide some pointers for contract negotiation.

What Is a Confidentiality Clause?

Most commercial contracts contain a confidentiality clause which places an obligation on one or both parties to keep specific information confidential. The obligation can either be one-way, where the receiving party must keep the disclosing party’s information confidential. Contrastingly, the obligation can be two-way, where both parties must keep the other’s information confidential. The obligation may be one-way because only one party has information to disclose or because it is in a stronger negotiating position.

What confidential information specifically is will be defined in your contract. A typical definition of confidential information may be: 

“Information disclosed to the receiving party verbally or in writing that relates to the contract, engagement, the disclosing party’s business or any other matter that is contemplated by the contract.”

Exceptions to Confidentiality

The confidentiality obligation does not apply in scenarios where the:

• information is already in the public domain;
• disclosing party has given written consent for the receiving party to disclose it;
• disclosure is required to provide the goods or services under the contract;
• receiving party discloses confidential information to a professional advisor (like a lawyer) concerning the contract, and the confidential obligation binds that professional advisor; and
• the disclosure is required by law, for example, in court proceedings.

Seeking Injunctions

The contract will also generally include a right for the parties to seek an injunction. They can seek this if the other party breaches their confidentiality. An injunction is a court order which orders someone to either do something or refrain from specific actions.

For example, if the receiving party shares confidential information on its website, an injunction could force them to take for the web page down.

What Is a Privacy Clause?

A privacy clause imposes an obligation on one or both parties to comply with the Privacy Act. The Privacy Act aims to protect individuals’ personal information. It also sets out how a business collects, stores and discloses personal information. Personal information includes:

• names;
• addresses; 
• emails;
• dates of birth; and
• phone numbers.

The Act sets out key principles which certain organisations must comply with, called Australian Privacy Principles (APPs). In practice, this means that if the other party provides you with access to personal information, you must collect, handle and disclose the information following the Act. 

Unlike a confidentiality clause, you cannot amend or negotiate the definition of personal information or your obligations under the APPs. You will need to consider whether the Act applies to you. If not, you must decide whether you would like yourself and the other party to be bound by these obligations.

Do You Need to Comply With the Privacy Act?

All organisations that collect personal information must comply with the Act unless they are a business with an annual turnover of $3 million or less. If your business has an annual turnover of $3 million or less, you may still need to comply with the Act if you (note that this list is not exhaustive):

• are a health service provider; or 
• you trade in personal information.

If you are not currently complying with the Act, a privacy clause which requires that you comply with it could add additional obligations that you may not be willing to accept.

Key Takeaways

It is crucial that you understand the terms of your contract for the provision of services so you can negotiate it and properly comply with it. A confidentiality clause places an obligation on one party or both parties to keep specific information confidential. In comparison, a privacy clause generally requires that one or both parties comply with the Act, whether you are already under an obligation to do so or not. If you need assistance reviewing your contract or complying with Australian privacy law, contact LegalVision’s online lawyers on 1300 544 755 or fill out the form on this page.