Disclosure: Definition, Example and Related Terms
What is Disclosure ?
In commercial contracts, disclosure requirements often specify what information must be shared, when it must be shared, and with whom it can be shared. This might include financial information, intellectual property details, potential conflicts of interest, or material facts that could affect the agreement.
The importance of disclosure cannot be overstated - failing to disclose required information can lead to serious consequences, including contract termination, legal liability, or even fraud claims. Proper disclosure helps parties make informed decisions and can protect both the disclosing party and the receiving party.
There are different types of disclosure, including mandatory disclosure (required by law or regulation), voluntary disclosure (chosen to be shared), and selective disclosure (shared with specific parties only). Each type serves different purposes and carries different obligations and protections.
Example(s)
Scenario Description A company selling its business to another company The seller must disclose all material information about the business, including financial statements, legal disputes, intellectual property rights, and potential liabilities. This allows the buyer to make an informed decision about the purchase and helps prevent future disputes. A software development agreement between two companies Both parties must disclose any pre-existing intellectual property that will be used in the project, any third-party software dependencies, and any potential limitations that could affect the development process. This ensures clear ownership rights and helps prevent intellectual property disputes.