Contents
As a small business owner in 2025, you may be wondering how to best protect confidential information. In today’s fast-paced digital landscape, this sensitive data is what makes your business unique and helps you stand out from your competitors.
New technology continues to evolve and make it easier for individuals, such as employees, to copy and misuse confidential data obtained during employment. With the rise of remote working, enhanced cloud services and AI-powered tools, even inadvertent disclosures can rapidly spread, compromising information such as financial records, client lists, proprietary software codes and strategic documents.
It is more important than ever for your business to take proactive steps to safeguard this information. Clearly defining how your organisation handles confidential data from the outset — whether when onboarding new employees, engaging contractors, or partnering with suppliers and service providers — helps prevent future disputes and costly breaches.
By setting out clear guidelines on confidentiality early in your business relationships, you can minimise the risk of disputes later on, ultimately saving you time, money, and unnecessary headaches.
One of the simplest and most effective ways to protect your sensitive data is to include a confidentiality clause in your contracts. But what exactly is a confidentiality clause and how does it function? And is it different to a privacy clause?
This article will guide you through the essential aspects of confidentiality clauses, ensuring that your business’s sensitive information remains secure in the dynamic environment of 2025.
What Is A Confidentiality Clause?
Simply put, a confidentiality clause is a legally binding provision that obliges one or both parties to maintain the secrecy of specified information.
Such clauses are an essential mechanism not only for protecting sensitive information that gives you a competitive edge, but also for deterring employees and other parties from misusing or misappropriating your valuable business data.
Why is it important to maintain confidentiality in the workplace? Find out here.
A confidentiality clause may take the form of a standalone agreement — such as a Non-Disclosure Agreement — or it may be integrated into a larger contract, like an Employment Contract or a Contractor Agreement. Ultimately, what matters is its enforceable legal effect.
You can choose for the confidentiality clause to be a one-way obligation or a mutual obligation:
- One-way confidentiality: The receiving party must keep any information provided by the disclosing party confidential. For example, if Party B signs a one-way confidentiality clause with Party A, Party B must not disclose any information received from Party A.
- Mutual confidentiality: Both parties are bound by the same obligations, meaning each must keep the other’s confidential information secret.
What Is Confidential Information?
What constitutes ‘confidential information’ is defined by you within your confidentiality clause. In 2025, it’s more important than ever to clearly specify what is covered under this term.
This might include personal details of your employees and customers, as well as your proprietary business data — such as client databases, financial records, brand guidelines, secret recipes, or even software codes.
It’s often prudent to use a comprehensive definition of ‘confidential information’ to ensure that all sensitive data is covered, especially in long-term relationships where the nature of what you wish to protect may evolve. This is particularly valuable in 2025, with the emergence of new digital innovations and data-driven strategies.
There are, however, some common exceptions to confidentiality obligations. For instance:
- Information that is already publicly available.
- Disclosure required by law or necessary to perform under the contract — for example, when regulatory bodies request information.
- Information disclosed with the explicit, written consent of the disclosing party.
- When the receiving party is obtaining professional advice, and the advisor is legally bound to keep the information confidential.
Before signing any confidentiality clause, it’s wise to review these exceptions to ensure you fully understand which types of information may not be protected.
What’s The Difference Between Confidentiality Clauses And Privacy Clauses?
When dealing with sensitive information, it’s easy to confuse confidentiality clauses and privacy clauses. Although both address the handling of data, a confidentiality clause is designed to keep business information secret, whereas a privacy clause imposes obligations to comply with data protection regulations, such as the General Data Protection Regulation (GDPR). The latter explains how personal data should be collected, used, and stored.
For further insights on managing personal data responsibly, and to understand your obligations when trading in personal information, read more about it here.
Case Study: Showpo & Black Swallow
The critical importance of safeguarding confidential information was starkly illustrated in the case between Australian online fashion retailers Showpo and Black Swallow. Although this dispute originated in 2017, its lessons remain highly relevant in 2025, especially as data breaches continue to impact businesses across the globe.
Both Showpo and Black Swallow targeted a similar market, and the controversy centred on an allegation that a former employee downloaded a copy of Showpo’s extensive customer database and transferred it to a competitor.
Back in 2017, Showpo initiated legal proceedings after it was alleged that the data — containing sensitive contact details for over 306,000 customers, suppliers, and industry contacts — had been improperly shared. While this incident occurred several years ago, its ramifications are keenly felt today.
It was further alleged that Black Swallow used the data to send unsolicited promotional emails and even mimicked aspects of Showpo’s branding to position itself as a direct competitor. This case serves as a powerful reminder of the severe consequences that can arise from breaches of confidentiality.
Showpo succeeded in obtaining an interim injunction which prevented Black Swallow from further using or disclosing the confidential data — an essential measure to mitigate any additional damage.
The dispute was ultimately resolved through mediation, with Black Swallow agreeing to compensate Showpo and being permanently restrained from using or disclosing the confidential information. Such outcomes underscore the importance of robust confidentiality provisions.
This case is a stark reminder that breaches of confidential information often originate from within an organisation, highlighting the need for stringent internal controls and clear contractual obligations.
Enforcing A Confidentiality Clause
Enforcing a confidentiality clause effectively requires an understanding of the two main types of breaches: actual and anticipatory breaches.
An actual breach occurs when a party fails to uphold their contractual obligation by disclosing or misusing confidential information without authorisation — as seen in the Showpo and Black Swallow dispute.
Conversely, an anticipatory breach happens when a party demonstrates an unwillingness or inability to comply with their confidentiality obligations, such as by threatening to leak sensitive data.
When a breach occurs, the remedies available typically depend on the type of breach. In 2025, courts continue to award damages to compensate businesses for actual breaches, while anticipatory breaches more commonly result in injunctions designed to prevent further unauthorised disclosure.
What Should You Do If Someone Has Breached Your Confidentiality Clause?
If you suspect that a party has breached a confidentiality clause and misused or disclosed your confidential information, it is advisable to seek an amicable resolution before resorting to legal action. Early intervention can save time, money, and stress.
Begin by sending a formal letter to the other party outlining the breach. This letter should clearly detail the specific provisions of the confidentiality clause that have been violated, the damages incurred (or expected), and your precise demands for rectification. Additionally, it should advise the recipient of the subsequent steps you plan to take if the breach is not addressed — for instance, initiating legal proceedings. For further guidance, our Contract Review service can help you draft an effective notification.
- Alleged breach: Clearly outline the specific obligations that have been violated.
- Damages: Specify the harm or potential losses incurred as a result of the breach.
- Demands: State your expectations, whether that entails ceasing the unauthorised activity, providing monetary compensation, or any other remedial measure.
- Notification: Indicate what further actions you will take if the breach is not remedied, such as taking legal action.
Want To Find Out More?
We’ve discussed the vital role of confidentiality clauses and outlined the steps you should take if you believe your confidential information has been compromised.
So, what now? In the complex environment of 2025, it is essential to seek professional advice to ensure your contracts incorporate robust confidentiality clauses that offer comprehensive protection. With the evolving landscape of digital risks and regulatory updates, ensuring your agreements are up to date is more important than ever.
From refining your contracts to drafting formal letters and enforcing confidentiality obligations, Sprintlaw’s team of experienced lawyers is here to help. We offer personalised advice and document review services to ensure that your business’s sensitive information remains secure. For additional insights, feel free to explore our guides on online business privacy and contracts.
If you would like a consultation on your options moving forward, please call us on 08081347754 or email us at [email protected] for a free, no-obligation chat. Our advice is continuously updated to reflect the latest confidentiality laws and best practices in 2025.
Looking ahead, it’s crucial to regularly review and update your confidentiality agreements to reflect new technologies and evolving legal standards. Regular internal audits, ongoing staff training on data protection, and periodic legal reviews can help ensure your business remains compliant and resilient against breaches. For more details on future-proofing your legal documents, our comprehensive guides are a great place to start.
Get in touch now!
We'll get back to you within 1 business day.
Top 3 Legal Mistakes
Book in a free consultation with us to discuss your legal needs.
0 Comments on "Confidentiality Clauses: What Are They & How Can You Enforce Them? (2025 Updated)"