Penalty for Breach of Confidentiality
The penalty for breach of confidentiality is the punishment a breaching party receives for noncompliance with the terms of an existing nondisclosure agreement.3 min read updated on February 01, 2023
Updated November 5, 2020:
When Does a Breach of Confidentiality Agreement Arise?
A breach of a confidentiality agreement may occur when individuals make public information that they agreed to keep secret.
Confidentiality agreements are generally signed between an employer and its employees to protect the company's sensitive information from getting into the wrong hands.
What Is the Nature of Confidentiality Agreements?
Employers that need to protect their sensitive information generally have their employees enter a confidentiality agreement promising that they won't publicize certain information related to their work.
Where Are Confidentiality Agreements Included?
Confidentiality agreements may form part of the terms of an individual's employment contract, and they can also be signed mid-employment when the need arises.
What Are Examples of Breaches of Confidentiality Agreements?
Breach of confidentiality agreements can occur in the following situations:
- Disclosing proprietary information through publication in a written document, online article, newspaper, and related media.
- Revealing the information orally to another person.
- Using nonverbal communication to disclose information.
- Revealing an item or product which shouldn't be seen yet by other people.
- Revealing sensitive details about recipes, formulas, construction plans, and other information.
What Is the Nature of Confidentiality Agreements?
Confidentiality agreements may also overlap with intellectual property laws in situations where patent or copyright laws protect the information or products.
What Does Enforcing a Confidentiality Agreement Involve?
Generally, enforcement of a confidentiality agreement often involves awarding monetary damages to the party seeking enforcement.
Additionally, a confidentiality agreement can also be enforced by terminating the employment of the breaching party, forcing the employee to return any information or product belonging to the employer, or applying punitive measures on the employee.
Are There Any Defenses for a Breach of Contract Agreement?
Several breaches of contract defenses apply to breach of confidential agreement cases. One remedy that can be used is the defense of unclean hands. The defense of unclean hands is used where the party seeking enforcement has also engaged in the same type of conduct over which it is suing the breaching party, which makes them ineligible for seeking legal redress.
Where Are Confidential Agreements Used?
Typically, confidential agreements or nondisclosure agreements are employed in various contexts, such as:
- Employment contracts
- Business transactions
- Intellectual properties
- Litigation settlements
Is Violating a Confidentiality Agreement a Breach of a Contract?
Violating a confidential agreement constitutes a breach of contract.
Can Legal Action Be Made for Breach of Contracts?
Any party that feels it has suffered losses due to a breach can press legal charges, including seeking damages to cover the losses.
What Are the Factors to Consider When Signing a Confidentiality Agreement?
Before signing a confidentiality agreement, be sure you clearly understand the statements, events, and acts covered by its terms.
Forms of Confidentiality Agreements
Confidentiality agreements can take different forms, including:
- Least Restrictive Agreement: This type of agreement only restricts a person from revealing the financial terms of a legal settlement to the media.
- More Restrictive Agreement: This type of agreement prohibits a party from disclosing the details of a lawsuit, legal theories of the plaintiff or defendant in a lawsuit, or the provisions of a legal settlement.
In employment contracts, a nonsolicitation agreement is less restrictive, while a non-compete agreement is highly restrictive. The purpose of each agreement is to prohibit employees and ex-employees from engaging in certain conducts.
What Can a Party Who Files a Breach of Contract Lawsuit Include?
Most times, a party that files a breach of contract lawsuit usually include a demand for damages as compensation for the loss it suffered due to the conduct of the breaching party.
What Is the Penalty for Violating a Confidentiality Agreement?
Violating a confidentiality agreement attracts penalties based on the provisions of the agreement. The breaching party may be compelled to pay an agreed sum of money according to the terms of the agreement, or the provisions of the agreement may require the breaching party to lose any money it was awarded in a legal settlement.
If the terms of the agreement do not mention damages, the plaintiff must prove the damages it suffered as a result of the violating party's conduct and will only receive compensation for those damages.
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