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There are two main branches of confidential information. First, there is information which the law says is confidential and offers remedies for. Second, there is information that is defined in a contract as confidential and protected by the clauses of the contract. In this article we:

  • look at these two broad categories of confidential information; and
  • explore the benefit of using a contract to protect information, even if other protections automatically apply.

Information That the Law Says is Confidential

Even without a contract, some information is protected by other laws (other than contract law). For example, there can be an option to bring an action for breach of confidence without a contract. There is also the law of trade secrets and privacy laws that protect and control the privacy of information. We look at these confidentiality protections below.

What is Breach of Confidence?

Breach of confidence is an action that you can initiate without having a contract in place. To bring an action for breach of confidence, the information which is considered confidential must be:

  • of a confidential nature and not be public knowledge;
  • have been communicated as confidential or in circumstances which imply it is confidential;
  • identifiable and you can identify the information with sufficient specificity; and
  • at risk of actual or threatened misuse.

Usually, you will also need to be able to show that you have suffered some sort of detriment.

It can be difficult to establish a breach of confidence claim due to the nature of the things that have to be proven. Additionally, it can be difficult because an obligation of confidence does not automatically attach to all kinds of information. For this reason, it is useful to also use a contract to protect things you want to keep confidential.

What are Trade Secrets?

Any confidential information which has value to a business can be a trade secret. To protect a trade secret, you do not have to register it. It is instead protected because you keep it secret. For example, you can keep it secret by limiting who knows about it and managing access to information stored about it. You can also use contracts, such as non-disclosure agreements, to secure your trade secrets.

If a trade secret becomes public knowledge, it will cease to be classified as a trade secret. While breach of trade secrets can be enforced in the courts, this is often difficult. For this reason, it is vital to keep trade secrets confidential and to use effective measures to do this, including appropriate contracts.

How Do Privacy Laws Protect Personal Information?

Personal information is information or an opinion about an identified or identifiable person. Personal information is often considered a type of confidential information.

Privacy laws may apply to protect personal information. However, privacy laws do not automatically bind all businesses. For this reason, it is a good idea to create an obligation in a contract for the other party to:

  • comply with the relevant privacy laws, even if they do not usually have to;
  • treat any personal information you give to them or ask them to collect for you as confidential information;
  • only use and disclose personal information you give to them or ask them to collect for you for certain purposes; and
  • keep personal information secure, including through appropriate privacy and data security policies, staff training and technical protections.

Information That is Defined as Confidential in a Contract

To protect your information, you may choose to use a non-disclosure agreement or deed, also sometimes called a confidentiality agreement. A confidentiality agreement is a contract dedicated to confidentiality. However, if you provide or receive products or services, you should build a confidentiality clause into the broader sale or purchase agreement. 

The doctrine of freedom of contract encourages parties to negotiate and agree to contract terms that both parties are happy with. This means that you are free to define confidential information in an agreement as broadly or as narrowly as you like. 

For example, to define confidential information broadly, you might say it includes all information provided by you in connection with the contract, whether verbally or in writing and whether marked as confidential or not. Whereas if you want to define it more narrowly, you might define it as only including any written materials expressly and prominently marked as confidential. 

Why Should You Use a Contract to Protect Your Confidential Information?

Some key reasons you should use a contract to protect your confidential information include:

  • for clarity;
  • because it gives you another option for enforcing confidentiality or seeking payment for loss (which is to sue for breach of contract); and
  • because it allows you to choose exactly which materials you want to protect. 

We look at each of these reasons in more detail below.

How Does Using a Contract Provide Clarity?

Using a non-disclosure agreement or a confidentiality clause in a broader sale or purchase agreement makes it clear to both parties which information is private. It also allows you to control which exceptions to the requirement of confidentiality you will allow. 

For example, it is common to allow a service provider to provide your commercially sensitive information to their subcontractors. This is as long as it is on a ‘need to know’ basis and the service provider has asked the subcontractor to make similar promises about confidentiality.

How Does Using a Contract Give You Options?

If you use a contract with confidentiality provisions and someone uses or discloses your confidential information in an unauthorised way, you may have more than one option. You might still be able to bring an action for breach of confidence. However, you will likely also have the option to pursue a breach of contract claim for breach of the confidentiality provisions.

Note, if you include a confidentiality clause in a contract and still want the option to initiate an equitable breach of confidence action, you will need to avoid having any limiting clauses included in the agreement. For example, a limiting clause may say that the confidentiality clause is your only remedy for breach of confidentiality. 

How Does Using a Contract Allow You to Protect More Types of Information?

As touched on above, in a contract, you have the flexibility to define confidential information as including anything you want it to include (or excluding anything you do not want it to include). This gives you more control over the type of information that has protection.

Key Takeaways

The law offers some types of information protection as confidential information (or based on similar concepts like trade secrets or privacy). However, you can also use a contract to better define what confidential information is in a specific situation and protect it. Using a contract also gives you more control over the use and disclosure of information and provides you with another avenue to seek a remedy if someone misuses your confidential information. 

If you are looking for advice on confidentiality or for assistance with a non-disclosure agreement or confidentiality clause, contact LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page.

Frequently Asked Questions

What is breach of confidence?

Breach of confidence is an action that you can initiate without having a contract in place. The information must meet a set of requirements for it to be confidential and amount to a breach of confidence.

What is a trade secret?

Any confidential information which has value to a business can be a trade secret.

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