Need to Know

Contract Type:

The Receiving Party shall only disclose the Confidential Information to its employees and professional advisors who need to know the same for the Purpose. The Receiving Party shall ensure that such employees and professional advisors are bound by confidentiality obligations no less onerous than those set out in this Agreement. The Receiving Party shall be responsible for any breach of this Agreement by any such employees or professional advisors.


This clause specifies that:

1) The receiving party can only disclose confidential information received from the disclosing party to its own employees and professional advisors (e.g. lawyers, accountants) who absolutely need to know the information for the defined purpose under the agreement. It cannot be distributed on a broader basis internally.

2) Any such employees and advisors must be bound by confidentiality obligations at least as strict as those imposed on the receiving party itself under the agreement with the disclosing party. Steps must be taken to ensure they keep the information private before any access is provided.

3) The receiving party will remain responsible for any breaches of the confidentiality terms of the agreement by its employees and professional advisors. This includes both inadvertent and deliberate breaches by individuals it chose to disclose information to internally. The disclosing party can pursue the receiving party itself for redress.

4) By limiting disclosure internally only to those who genuinely need to know to achieve the intended purpose under the agreement, and ensuring these individuals are bound to keep information private, risks of wider breach or unintended/irresponsible use are minimized. A "need to know" basis implies judgement and restraint.

Key purposes and rationale for including a need to know clause are:  

1) Control: The clause helps maintain control over access to and use of sensitive information, ensuring it is distributed internally only on a targeted basis for the agreed purpose. Wider or unauthorized access and breach risks are reduced.

2) Indemnity: The receiving party agrees to remain liable and responsible for any breaches by its own personnel with access, so the disclosing party is indemnified against downstream misuse or irresponsibility. They can seek recourse in one place.  

3) Purposefulness: By limiting onward disclosure to only what is needed to achieve the purpose under the agreement, the clause fosters a purposeful and judicious handling of sensitive information. Unnecessary use or manipulation is discouraged.

4) Alignment: Staff and advisors with access are put under obligations equivalent to the receiving party's own to protect information. This aligns responsibility and interests throughout the channel of disclosure. All parties understand what is at stake.

5) Trust: Strict "need to know" standards instill confidence in the disclosing party that the receiving party and its personnel comprehend the value and importance of the shared information, and will handle it with due care and restraint. Only those who must know receive that trust and duty.

In summary, a need to know clause aims to encourage prudent and responsible management of access to sensitive information between parties by restricting onward disclosure internally to a targeted, purposeful basis under obligations to maintain confidentiality. At their fairest and most effective, these clauses rely on good faith efforts to balance open exchange with necessary control, and align interests through shared standards of oversight and conduct. However, they also demand diligence and judgment to achieve intent where provision alone will not suffice.

Purpose is found where design meets understanding and restraint in users, not through mechanisms of restriction alone. Effectiveness reaches inward not downward, and relies on partnership beyond compliance to forge reasonable practice.

History of the clause (for the geeks)

Early commercial contracts seldom addressed internal handling of confidential information in detail, relying on general duties of good faith. However, as knowledge grew crucial to competitive advantage, tensions emerged between open exchange and necessary control. Mere provision of terms proved inadequate where irresponsibility within organizations remained unchecked - interests stayed exposed, and uncertainty loomed over howinformation might be used or shared regardless of the spirit in which access was granted.

Into the 19th century, need to know concepts arose in both public and private sectors as matters of prudence where sensitive information was at stake. While contractual clauses were sparse, principles of purposeful access and aligned responsibility took hold - authority implied duty to handle privileged resources accordingly. Judgement was demanded to maintain prosperity through continuity of relationships and restraint on the corrupting effects of concentrated power over valuable assets. Equity required balancing control with facilitating flow - no party gained long-run benefit through hoarding beyond necessity or sowing mistrust.

By the early 20th century, need to know standards were recognized as enabling commercially valuable partnerships through reasonable information exchange. Contracts stipulated terms, but legitimacy and effect still relied on environment - diligence, oversight and shared norms of what "need" entailed in context. Mere mechanism alone did not instill purpose or align interests; and irresponsibility within waived external provision. At their most effective, obligations reflected understanding more than imposition - a quest for sustainable exchange through open access balanced by prudent control, not determined strictly by entitlement.

Mid-century, as knowledge grew pivotal to progress yet increasingly mobile, need to know clauses proliferated to encourage cooperation while safeguarding interests. But at their fairest and most prudent, these clauses recognized control was not absolute - restraint was also a virtue. While affording suppliers or customers necessary access for shared purpose, undue interference, manipulation or competition was discouraged. Equity mattered as did efficiency here. Effect worked inward through alignment, not downward imposition alone. Judgement was means and end - no formula or decree sufficed to instill purpose in practice without insight to balance advantage across interests in context. Partnership beyond mechanics shaped outcome.

Today, robust need to know regimes aim to foster environments of trust that facilitate open exchange, but prudent clauses recognize no mechanism alone achieves this - restraint requires responsible agents. At their best, these clauses reflect understanding that control is not an end itself and depends vitally on how authority is wielded; none gain long-run benefit through irresponsibility. They look inward to choices and consequences, not terms alone. While affording parties capacity to distribute resources or risks to purpose, judgement remains to curb excess and balance interests. Equity informs as efficiency. Shared standards align, and oversight works through voluntary assumption of duty, not decree. Where these clauses achieve intent, relationships emerge through good faith to steward resources for mutual gain, not exploit without accountability. In the end, shared prosperity alone sustains through willingness to forbear as much as avail one's due. Partnership is reached, not imposed, where users relinquish rather than retain rule and work to reconcile interests instead of concentrating benefit without cause. Effectiveness relies on environment as much as design.

In summary, need to know clauses reflect recognition that open exchange depends fundamentally on how we choose to govern resources and apply knowledge in practice. No device alone bestows understanding or solves irresponsibility. At their most prudent and purposeful, these clauses represent a shared quest for stewardship and oversight that aligns interests through voluntary restraint, not control as an end itself. But choice of means and manner remain with users; and purpose adapts through wisdom, not formula. Equity relies on balancing claims through duty to forbear when required, not asserting entitlement without consequence.

Prosperity emerges where power is tempered by insight into mutual reliance and the many factors at play beyond narrow self-interest. In the end, shared benefits alone sustain what private motive might otherwise corrupt or lose through oversight of the whole. Effectiveness reaches inward to enlist judges where empowered agents, not impose direction where ciphers expected to comply without thought or care for result. Responsibility proves the more productive path where these clauses fail or prevail on users' grasp of what is at stake.