Nowadays, there are many business lines of enterprises that require high security. Disclosure of confidential information of enterprise may cause great damage to that enterprise. Therefore, many enterprises attach importance to the term of confidential information when signing Contracts. Some enterprises also request customers and partners to sign a Confidential Disclosure Agreement (CDA) in addition to the Contract. So what contents does confidential information term include? What should enterprises pay attention to when signing a Contract containing the term of confidential information or CDA? This article will answer the above legal issues.
1. What contents does confidential information term often include?
Normally, term of confidential information in Contracts or CDA includes the following basic contents:
- Object and information that need to be confidential: Depending on the business line, the demand of enterprises, the object and information that need to be confidential may be different. However, objects and information needing to be confidential mainly include business secrets, revenue; contracts and agreements; lists and information of the enterprise’s customers; designs, samples and products owned by the enterprise; and other information in the course of business.
- Rights and obligations of the parties in disclosing information: When enterprise signs a contract, customer or partner can access some confidential information of the enterprise. Therefore, enterprise needs to state clearly the scope of accessing, using and deciding information that customer, partner know during the performance of the Contract, agreement with enterprise.
- Responsibility of the party breaching confidential information term: Although enterprises may have carefully specified the term of confidential information in the Contract, the risk that information is leaked and disclosed is always present. Thus, specifying the responsibility of the breaching party, such as compensating for damages when disclosing information to any third party, is necessary to reduce risks for enterprises and raise awareness of disclosing information of customers and partners.
- Exclusion of responsibility for disclosing information: In most cases, the party who receives information is responsible for disclosing information owned by the enterprise. However, in some cases regulated by law or under the agreement, the party receiving information will be excluded from responsibility and do not have to compensate for damages if the information is disclosed to a third party.
2. What should enterprises pay attention to when signing Contract containing the term of confidential information?
When signing a Contract containing confidential information term or CDA, enterprises need to note the following issues before signing:
– Explaining clearly about objects, information that need to be confidential: Listing objects and information that need to be confidential is not enough because some objects such as business secrets, revenue are not clear and may be understood in different ways. Therefore, enterprises should clearly define and explain what business secrets or revenue in the scope of disclosing in the Contract include (for example: the company’s financial statements, reports on revenue and expenditure, allocating company’s assets and profits, …)
In this way, the parties can easily identify objects and information that must be disclosed and determine responsibility of the party receiving information if disclosing confidential information.
– Determining the value of compensation when information is disclosed: In many cases, the parties often specify the value of compensation for damages when information is disclosed according to actual damages. However, determining the actual damages to the information is very difficult. Thus, the parties should agree on a specific value of compensation after considering risks and the value of Contract.
In case the enterprise is the owner of the information, enterprise can specify the value of compensation close to the damage that enterprise estimates and considers.
In case the enterprise is the recipient of the information, enterprise can protect its rights and interest by specifying that the maximum value of compensation does not exceed the value of the Contract or another value of compensation.
Above are the legal shares about the term of confidential information in Contracts. Enterprises can consider before signing Contracts, Confidential Disclosure Agreements.
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