Resolution of breaches of confidentiality clauses of a project

During project implementation, breaches of confidentiality clauses of a project are common legal risks which may result in serious damage and give rise to disputes if not promptly identified and addressed.

I. Common legal risks related to breaches of confidentiality clauses of a project 

In the course of project implementation, confidentiality clauses are often underestimated or drafted merely in a formalistic manner, leading to numerous potential legal risks. First and foremost, the most significant risk is the leakage of confidential information, including business secrets, technical data, financial plans, customer lists, or undisclosed internal information. Once such information is unlawfully disclosed, the project owner may lose its competitive advantage, directly affecting investment efficiency and market position.

In addition, breaches of confidentiality clauses may entail liability for damages. In practice, proving damages caused by confidentiality breaches is often highly complex, particularly with respect to indirect losses or damage to reputation and brand value. Nevertheless, where confidentiality clauses are carefully and strictly drafted, the breaching party may still be subject to stringent civil liability in accordance with contractual agreements and applicable laws.

Furthermore, in certain cases, breaches of confidentiality clauses may lead to administrative liability or even criminal liability, especially where the disclosed information falls within the scope of protected business secrets, technological secrets, or personal data under the law. It significantly increases the legal risks for individuals and organizations involved in the project.

II. Understanding breaches of project confidentiality clauses

In project implementation, the protection of confidential information plays a particularly important role, as a single breach of a confidentiality clause may cause serious economic losses, reputational harm, and erosion of competitive advantage. Accordingly, clarifying the concept, content, identifying signs, and principles for ensuring compliance with project confidentiality clauses forms a necessary basis for preventing and addressing potential legal risks.

1. What constitutes a breach of a confidentiality clause of a project?

A breach of a confidentiality clause is understood as any act of non-compliance with confidentiality obligations agreed upon by the parties in the contract or other project-related documents, including but not limited to the unauthorized disclosure, use, copying, transfer, or granting of access to confidential information to third parties.

Such breaches may occur intentionally or unintentionally and may be committed by individuals directly involved in the project, internal personnel, subcontractors, or related partners. Regardless of the form, any act contrary to the agreed confidentiality commitments may be deemed a breach and lead to corresponding legal liabilities.

2. What contents are commonly included in confidentiality clauses of a project? 

A comprehensive and effective project confidentiality clause typically includes the following main contents:

• Scope of confidential information: Clearly defining what types of information are considered confidential (technical documents, financial data, customer information, source codes, internal processes, etc.);
• Purpose of information use: Stipulating that confidential information may only be used for project implementation and not for any other purposes;
• Confidentiality obligations of the parties: Including obligations not to disclose, copy, or unlawfully transfer confidential information;
• Confidentiality term: Which may extend throughout the project duration and for a specified period after project completion;
• Remedies for breach: Provisions on sanctions, compensation for damages, and measures to remedy consequences.

The absence of, or ambiguity in, these provisions is a common cause of disputes relating to breaches of confidentiality clauses.

3. How can early signs of breaches of confidentiality clauses be identified?

Early identification of breach indicators is crucial to mitigating damage. Common signs include the leakage of internal project information to external parties; the appearance of confidential documents at organizations or individuals without authority; unauthorized access to project data; or the use of project information by partners for competing projects.

Additionally, abnormal behavior by personnel or partners, such as excessive data copying beyond what is necessary, or sharing documents through uncontrolled channels, may also serve as early warning signs of potential confidentiality breaches.

4. What principles should be observed to ensure compliance with confidentiality clauses of a project?

To minimize the risk of breaches, the parties should observe several fundamental principles.

First, the principle of transparency and specificity in confidentiality agreements, ensuring that clauses are clearly drafted, easy to understand, and practically enforceable.

Second, the principle of access control, whereby only individuals or departments that are genuinely necessary are permitted access to the project’s confidential information.

In addition, the principle of proactive prevention should be observed, including training personnel on confidentiality obligations and applying appropriate technical and data management measures.

Finally, the principle of strict enforcement is essential, as timely and consistent application of sanctions helps deter and prevent violations throughout the project lifecycle.

III. Legal provisions related to breaches of project confidentiality clauses

The handling of breaches of project confidentiality clauses is not based solely on contractual agreements between the parties, but is also governed by various legal provisions, depending on the nature of the disclosed information, the breaching subject, and the legal consequences arising therefrom. Accordingly, correctly identifying the applicable legal grounds is a main factor in protecting the lawful rights and interests of the infringed party.

1. Which laws govern breaches of project confidentiality clauses?

At present, breaches of confidentiality clauses of a project are not regulated by a single specific legal instrument, but rather are governed by various specialized laws, including:

• The Civil Code 2015: Articles 385 and 398 on contracts and agreed contractual contents; Articles 351 and 360 on civil liability for breach of obligations; Article 419 on compensation for damages due to breach of contract;
• The Commercial Law 2005 (for projects of a commercial nature): Articles 292, 300, 301, and 302 on remedies for breaches of commercial contracts;
• The Law on Intellectual Property 2005 (as amended and supplemented in 2009, 2019, 2022, and 2024): Article 84 on general conditions for protection of business secrets; Article 127 on acts of infringement of rights to business secrets; etc.

Accordingly, depending on the nature of the project, the type of confidential information, and the specific breach, the legal basis for handling breaches of project confidentiality clauses must be determined on a combined assessment of contractual agreements and relevant provisions of civil, commercial, and intellectual property laws, in order to ensure lawful application of sanctions and effective protection of the infringed party’s legitimate rights and interests.

2. What is the typical legal process for handling breaches of confidentiality clauses?

Currently, there is no specific statutory procedure governing the handling of breaches of confidentiality clauses of a project. In practice, such matters are commonly addressed through the following steps:

• Step 1: Identification of the breach: Clarifying whether acts of disclosure, unauthorized use, or transfer of confidential information constitute a breach of the agreed confidentiality clause;
• Step 2: Collection and preservation of evidence: Including project contracts, confidentiality clauses/NDAs, emails, system access logs, internal documents, and evidence of actual damages;
• Step 3: Notification of breach and request for remedial action: The infringed party sends written notice requesting cessation of the breach, remediation of consequences, and compensation for damages (if any);
• Step 4: Application of contractual and legal remedies: Including breach sanctions, compensation for damages, unilateral termination of the contract, or requests for apology and public correction;
• Step 5: Dispute resolution: If the parties fail to reach agreement, disputes may be resolved through negotiation, mediation, arbitration, or the courts, depending on contractual arrangements.

Strict compliance with legal procedures in handling confidentiality breaches not only ensures the legality and enforceability of remedial measures, but also helps mitigate dispute risks and provides a solid basis for protecting the infringed party’s lawful rights and interests during dispute resolution.

3. What common breaches occur in relation to project confidentiality clauses?

Common breaches encountered in practice include:

• Disclosure of project information to third parties without the consent of the other party;
• Use of project confidential information for purposes beyond the contractual scope;
• Unauthorized copying or transfer of project data or internal documents;
• Failure to implement, or incomplete implementation of, agreed confidentiality measures;
• Continued use of confidential information after contract or project termination.

Such acts not only lead to liability for damages but may also cause serious harm to the economic interests, reputation, and competitive advantages of the project parties.

IV. Questions regarding breaches of confidentiality clauses of a project

In practice, during project implementation and dispute resolution, parties often encounter various issues relating to the identification of breaches, the scope of liability, and the legal consequences of breaches of project confidentiality clauses. Below are some common questions that require clarification to help parties proactively prevent risks and effectively handle breaches.

1. What situations commonly lead to breaches of confidentiality clauses of a project?

In practice, breaches often arise from situations such as:

• Sharing project information with third parties without contractual approval;
• Project personnel leaving employment but continuing to use or disclose confidential information;
• Loose data management without appropriate technical security measures;
• Using project confidential information for purposes beyond those agreed.

These situations often stem from inadequate internal controls or insufficient awareness of the legal value of confidentiality clauses.

2. Is there a difference between breaches of confidentiality clauses and violations of data protection regulations?

Breaches of confidentiality clauses primarily constitute breaches of contractual obligations between the parties and are handled based on contractual agreements and the Civil Code 2015 and Commercial Law 2005.

In contrast, violations of data protection regulations (particularly regarding personal data) constitute breaches of mandatory legal provisions and may result in administrative sanctions or other liabilities under specialized laws such as the Cybersecurity Law 2018 and the Personal Data Protection Law 2025. In practice, a specific act may simultaneously constitute both types of violations and be subject to parallel handling.

3. What can project parties do to avoid breaches of confidentiality clauses?

To minimize risks, the parties should:

• Draft clear and specific confidentiality clauses covering information scope, confidentiality obligations, and breach remedies;
• Establish internal management procedures and access control mechanisms for information;
• Execute separate non-disclosure agreements (NDAs) with personnel, partners, and subcontractors;
• Regularly review and update confidentiality measures appropriate to the nature of the project.

Early prevention is always more effective and less risky than addressing breaches after disputes arise.

4. How can parties claim compensation for damages arising from breaches of project confidentiality clauses?

Upon a breach, the infringed party may claim compensation based on:

• Compensation and sanction provisions agreed in the contract;
• Legal provisions on civil liability for breach of obligations (Articles 351, 360, and 419 of the Civil Code 2015).

To succeed in a compensation claim, the claimant must prove all requisite elements, including the breach, actual damages, causal relationship, and fault of the breaching party.

5. What consequences may arise from breaches of project confidentiality clauses?

Breaches may result in serious legal and practical consequences, including:

• Obligations to compensate for damages and pay contractual sanctions;
• Termination or cancellation of the project contract;
• Disputes before courts or arbitration;
• Serious adverse impacts on reputation, competitive advantage, and long-term business operations.

Accordingly, confidentiality clauses are not merely formalities but constitute a core mechanism for protecting the fundamental interests of a project.

V. Are you looking for a reputable law firm to support issues related to breaches of project confidentiality clauses?

If you are facing difficulties in identifying breaches, assessing damages, or drafting and enforcing project confidentiality clauses, consulting experienced lawyers can help you minimize legal risks and effectively protect your rights from the early stages.

The above information is for reference purposes only. Should you require detailed advice for a specific case, please contact NPLAW Law Firm for immediate consultation.