Just as there exists no general duty of disclosure, so parties, when

entering into negotiations for the conclusion of a contract, are normally

under no obligation to treat the information they have exchanged as

confidential. In other words, since a party is normally free to decide

which facts relevant to the transaction under negotiation to disclose,

such information is as a rule to be considered non-confidential, i.e.

information which the other party may either disclose to third persons

or use for purposes of its own should no contract be concluded.

I l l u s t r a t i o n

1. A invites B and C, producers of air-conditioning systems, to

submit offers for the installation of such a system. In their offers B

and C also provide some technical details regarding the functioning

of their respective systems, with a view to enhancing the merits of

their products. A decides to reject B’s offer and to continue

negotiations only with C. A is free to use the information contained

in B’s offer in order to induce C to propose more favourable

conditions.

A party may have an interest in certain information given to the

other party not being divulged or used for purposes other than those

for which it was given. As long as that party expressly declares that

such information is to be considered confidential, the situation is clear,

for by receiving the information the other party implicitly agrees to

treat it as confidential. The only problem which may arise is that if the

period during which the other party is not to disclose the information is

too long, this might contravene the applicable laws prohibiting

restrictive trade practices. Yet even in the absence of such an express

declaration the receiving party may be under a duty of confidentiality.

This is the case where, in view of the particular nature of the

information or the professional qualifications of the parties, it would

be contrary to the general principle of good faith and fair dealing for

the receiving party to disclose it, or to use it for its own purposes after

the breaking off of negotiations.

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I l l u s t r a t i o n s

2. The facts are the same as in Illustration 1, the difference being

that in its offer B expressly requests A not to divulge certain

technical specifications contained therein. A may not use this

information in its negotiations with C.

3. A is interested in entering into a joint venture agreement with

B or C, the two leading car manufacturers in country X.

Negotiations progress with B in particular, and A receives fairly

detailed information relating to B’s plans for a new car design.

Although B does not expressly request A to treat this information as

confidential, because it is for a new car design A may be under a

duty not to disclose it to C, nor is A allowed to use those plans for

its own production process should the negotiations not result in the

conclusion of a contract.

The breach of confidentiality implies first liability in damages. The

amount of damages recoverable may vary, depending on whether or

not the parties entered into a special agreement for the non-disclosure

of the information. Even if the injured party has not suffered any loss,

it may be entitled to recover from the non-performing party the benefit

the latter received by disclosing the information to third persons or by

using it for its own purposes. If necessary, for example when the

information has not yet been disclosed or has been disclosed only

partially, the injured party may also seek an injunction in accordance

with the applicable law.