Each party confirms that any person to whom it discloses Confidential Information pursuant to Clause [X] (Permitted Disclosures) (a “Permitted Disclosee”) will be under a duty of confidence in relation to that Confidential Information. Each party shall be liable for any failure by its Permitted Disclosees to comply with the terms of this Agreement as if such failure were a failure by that party itself.
Here is a plain English explanation of the Liability for Disclosures of Permitted Disclosees clause:
- This clause refers to confidential information that is disclosed under another contract clause allowing certain permitted disclosures.
- It requires each party to confirm that anyone they disclose confidential information to under that clause must keep it confidential.
- These recipients allowed to receive confidential information are called "Permitted Disclosees."
- The disclosing party accepts full liability if any Permitted Disclosee breaks confidentiality.
- It's as if the disclosing party itself breached confidentiality if its Permitted Disclosee fails to comply.
- This gives the disclosing party responsibility and risk for choosing Permitted Disclosees carefully and ensuring they maintain confidentiality.
- The clause protects the confidential information if shared with outsiders as permitted, keeping liability with the original holder.
The concept of limiting liability for permitted disclosures has its roots in early English common law on agents and vicarious liability.
Under the doctrine of respondeat superior, employers bore responsibility for agents' actions. This filtered into confidentiality practices.
By the 19th century, agency and employment law was codified in England. Employers became liable for employee negligence or misdeeds. So disclosing confidential information to staff meant shouldering risk if they improperly leaked it.
English courts also extended vicarious liability to certain contracted outsiders. Financial advisors, contractors etc. could bind principals if entrusted with confidential data. So businesses had growing risks sharing secrets.
To limit exposure, English contracts began permitting specific disclosures but expressly keeping liability with the disclosing party. This let them share necessarily to operate, while avoiding becoming vulnerable if confidants improperly exposed information.
Permitted disclosee clauses emerged by the early 20th century in English agreements. Parties wanted the flexibility to disclose but not endanger proprietary information. Strict confidentiality requirements were unworkable.
Today, these clauses are commonplace in English contracts involving trade secrets or personal data. They evolved from broad concepts of vicarious liability in English common law applied to confidential context.