Confidentiality Agreements: A Base Case and Many Bells & Whistles

Jun 20, 2019 | ALI CLE Legal Journals, Real Estate

As soon as discussions about any potential transaction start to get serious, one side often asks the other to sign a Confidentiality Agreement.

Any Confidentiality Agreement starts from the proposition that information about a “Transaction” that one party (“Discloser”) shares with the other (“Recipient”) should stay confidential (the “Confidential Information”). If Discloser shares Confidential Information but doesn’t bother to require Recipient to keep it confidential, then Discloser can hardly complain when Recipient lets the cat out of the bag.

Confidentiality Agreements often go far beyond that. They sometimes specify measures that Recipient should take to preserve confidentiality. They sometimes include the word “indemnify.” They sometimes have elaborate language consenting to injunctions and other extreme remedies—which is sort of pointless, since it’s unlikely that the victim of a wrongful disclosure will file suit or a court will be able to do much about the violation. And it would be too late, anyway.

Once Discloser has signed any Confidentiality Agreement, regardless of its boilerplate terms, Discloser has gotten almost all the value any Confidentiality Agreement will ever deliver: a recognition that Discloser wants to keep the Confidential Information confidential. For any responsible Recipient, that should do it.

Adding more verbiage to a Confidentiality Agreement makes it more complex, triggering more negotiations, often without producing much more practical value. Much of the additional legalese relates to hypothetical eventualities that rarely if ever occur or seeks to impose oppressive obligations and remedies dreamed up by creative counsel in previous deals.

The Practical Real Estate Lawyer

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