Confidentiality must be guaranteed in commercial transactions.
Each transaction includes elements of confidentiality, especially in relation to the sale of assets, property, shares or in the case of brokerage, franchising and employment. During the negotiation, the seller will usually provide the potential buyer with documents and business information of a confidential nature to help with due diligence regarding the prospect of a purchase. Even the fact that the seller is ready to sell, as well as the mention of consideration, are confidential until the transaction is completed. Confidentiality is guaranteed by an appropriate agreement to protect the seller and prevent the potential buyer or its employees, representatives or professional advisers from disclosing documents or information about a potential transaction.
Upon completion or termination of negotiations, regardless of whether the transaction leads to the signing of an agreement or not, an obligation is imposed to return the documents and information provided. It is desirable that a confidentiality agreement be signed prior to the disclosure of information, even if its purpose is to cover information already disclosed. Thus, the recipient of confidential information cannot be unfairly favored, as required by the principle of equity and contract law.
Confidentiality is included in the documents related to the chapters of the terms of the potential agreement, as well as in almost every commercial agreement.In addition to the seller, the buyer may also request that the information provided to the seller be kept confidential. In a confidentiality agreement, the recipient undertakes to keep certain information and documents confidential and use them only for a specific purpose. Certain measures are taken to protect information, such as placing the word “Confidential” on the document, signing and sealing the document by the person who provided it, sending a numbered copy that cannot be processed, indicating persons who may have access to the content, which will also be required keep it confidential.
If it is necessary to provide confidential information to an unauthorized third party, the recipient must obtain the supplier’s prior written consent and then ensure that the confidentiality of the third party is respected. In case of unauthorized, negligent or unintentional disclosure of confidential information, the recipient undertakes to immediately notify the other party in writing. The confidentiality agreement is valid for a certain period of time, however, the rights and obligations arising from it remain valid for a longer period specified in the agreement, despite its expiration or termination.
In the event of a breach of confidentiality, the available remedy is to secure an injunction preventing unauthorized disclosure and damages, even if damages are difficult to prove.The criteria for such a claim to be satisfied are: (a) the information provided is made confidential, (b) the information must be disclosed under circumstances that create a duty of confidentiality, and (c) it is used without authorization to the detriment of the service provider. The seller disclaims any responsibility for the accuracy and completeness of the information and declares that it makes no warranties or representations regarding them or their updates.
In the event that a potential transaction is not completed, the buyer is invited to return or destroy all information, copies, notes and records made and delete them if they are digital. Moreover, they are asked to sign a statement that they have done so. Confidentiality agreements are now common practice, especially for large transactions. A commitment to confidentiality may be in the form of a formal agreement or letter.
George Coucunis is a lawyer practicing in Larnaca and founder of George Coucounis LLC, Advocates & Legal Consultants