Do you want to make the recipient responsible for disclosure or use of confidential information by its representatives other than as authorized in this agreement?

If your answer to this question is “Yes,” we recommend that you select the first option and say that the recipient will be liable to the same extent that it would have been had it disclosed or used the confidential information itself.

The second option reflects perhaps the most prevalent way of imposing liability for disclosure by representatives—using “shall cause.” But in this context using “shall cause” imposes an obligation that the recipient can’t be sure of complying with, as it doesn’t in fact control its representatives; the best it can do is instruct them how to behave. That raises the possibility—perhaps unlikely—of dispute. For a general discussion of impossible obligations, see this post on the Adams on Contract Drafting blog.

The third alternative would be to use language in which the recipient indemnifies the disclosing party for unauthorized disclosure or use by representatives. In this context, indemnification is problematic in that some courts and commentators believe that for a claimant, indemnification provides a broader remedy than does a claim for breach of contract. As a result, addressing this issue in a confidentiality agreement by means of indemnification language could well prolong review and negotiations. For more on this, see this post on the Adams on Contract Drafting blog.