A confidentiality clause requires one or more parties to protect specified nonpublic information.
It defines what information is confidential, how it may be used, and when it may be disclosed.
Why a confidentiality clause matters
Confidential information can include business plans, pricing, customer lists, technical information, settlement terms, personal data, financial records, or transaction details.
The clause matters because it sets expectations before information is shared and gives the parties a contractual basis for objecting to unauthorized use or disclosure.
Where a confidentiality clause appears
Confidentiality clauses appear in nondisclosure agreements, employment agreements, service contracts, settlement agreements, licensing agreements, acquisition negotiations, and consulting contracts.
They may be standalone or included as one section inside a larger contract.
How it differs from nearby terms
A confidentiality clause protects information. A noncompete term restricts competitive work or business activity, while a nonsolicitation term restricts certain approaches to customers or employees.
Confidentiality can also be narrower or broader than trade secret protection because a contract may protect information that is confidential even if it does not meet every trade-secret requirement.
Practical example
A company shares sales data with a consultant. The contract says the consultant may use the data only for the project and may not disclose it to outside parties except as authorized.
Related Terms
Quick check
Question: What is the basic purpose of a confidentiality clause?
Answer: To restrict how protected nonpublic information may be used or disclosed.