Confidentiality agreements will generally hold the recipient of the confidential information responsible for any breach by its representatives. It is common for a recipient entity to be asked to provide an indemnity for any unauthorised disclosure. However, exceptions to liability can be negotiated by a recipient entity if its representatives have provided confidentiality undertakings directly to the discloser.
An information provider should consider whether an indemnity is necessary (and the form of it). For example, common law damages may provide an adequate remedy anyway, because the likely ‘usual’ loss from the wrongful disclosure would be compensated providing causation can be proved. For example, if a recipient used confidential information in breach of a confidentiality agreement which caused the information provider to lose the benefit of a third party contract, then that loss may be recovered by way of damages for breach. Indemnities are preferable if the loss that may be suffered would be too remote as a matter of contract damages (e.g. the likely loss is too particular to the information provider to be assumed by the recipient) and therefore not recoverable as a matter of ordinary damages for breach of contract. Attention should be paid to the category of loss that is covered, the causative language and the type of conduct that will be captured by the breach.
The usual remedy for breach is the grant of an injunction to prevent unauthorised disclosure by the recipient or to prevent the recipient from unfairly taking advantage of the information, together with damages for any loss arising from the disclosure. These remedies may be available even where no indemnity has been agreed.
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