Frequently Asked Questions
What is confidential information?
Confidential information is not legally defined, but there are some conditions which confidential information has to meet. First of all, information identified as confidential has to actually be confidential, meaning it should not be public knowledge. In addition to that the disclosing party has to have a reason (including legal reason) to identify information as confidential. In order to avoid confusion, it is advised to describe confidential information as precisely as possible. It has to be taken into consideration that an agreement in which all of the information exchanged between the parties is declared confidential, might be too confining for the receiving party.
In the Non-Disclosure Agreement it is agreed that confidential is not information which was needed to disclose due to the obligations derived from the relationship between the parties; which the party was obligated to disclose under the law; or which is or becomes public knowledge in any way other than breaching the Non-Disclosure Agreement.
What can the confidential information be used for?
The receiving party may use the confidential information as much as it is needed in order to fulfill his / her obligations derived from the agreements between the parties. Other than that it is forbidden to the receiving party to use the confidential information, unless the receiving party has a clear permission of the disclosing party.
Additionally the receiving party may use and disclose the confidential information when the obligation comes from the law.
The receiving party does not have an obligation to keep confidential the information which is or becomes public knowledge in any way other than breaching the Non-Disclosure Agreement.
What if the receiving party breaches the confidentiality obligation?
The parties agree, that if the receiving party breaches the confidentiality obligation, the disclosing party has the right to demand contractual penalty. Additionally the disclosing party has the right to demand compensation for damages for the part which is not compensated by the penalty.
What is a contractual penalty?
A contractual penalty is an obligation established in a contract for a contract party who violates the contract to pay an agreed amount of money to the aggrieved contract party.
If the contractual penalty payable is unreasonably large, a court may reduce it to a reasonable amount upon the request of the contract party obligated to pay it, taking primarily into account the fulfilment of the obligation by the party, the legitimate interests of the other party and the financial standing of both parties. The party obligated to pay a contractual penalty may not request a reduction of the penalty after the payment of the penalty.
What if the damages are bigger than the contractual penalty?
If the contractual penalty is smaller than the total damages resulting from the breach, the disclosing party has the right to demand the compensation for damages for the part which is not covered by the penalty. In case where the person refuses to compensate the damages, the disclosing party has the possibility to file an action to the court. But it must be considered that usually it is difficult to prove the amount of the damages in these kind of cases. Therefore it is advised to consider the possible amount of the damages when determining the amount of contractual penalty.