Page 7 - John Hundley 2018

Focus on Contract Law

Sharp Thinking

No. 149 Perspectives on Developments in the Law from Sharp-Hundley, P.C. March 2018

Confidentiality Clauses Must Meet Public Policy Tests

“A bargain to refrain from disclosing to a third person, to whom a duty of disclosure exists,
information of value or interest to him is illegal.”

So says the Appellate Court in Chicago in a decision concerning confidentiality terms in contracts.

Ruling in Signapori v. Jagaria, 2017 IL App (1st) 160937, the court dealt with a situation where
the confidentiality provision was inserted to conceal from banks and the Small Business
Administration that the parties were violating previous agreements with those bodies. The court
rejected an argument that relief should be denied because violation of bank fraud statutes had not in
fact been proven.

“There is no question that the purpose of the confidentiality provision was to conceal the parties’
prior and continuing misrepresentations to the banks and the SBA,” the court said. “We do not see
any indication that the nature of the injury, whether criminal or tortious, is essential to the central
issue of whether the confidentiality provision is contrary to the public policy of this State.”

Existence Of Release Depends On Operative Language

A document’s apparent intent to release claims is insufficient if the document does not also
contain operative release language.

That’s the ruling of a panel of the Appellate Court in Chicago in C.O.A.L., Inc. v. Dana Hotel, LLC,
2017 IL App (1st) 161048.

In Dana Hotel, plaintiff and defendant made an agreement for plaintiff to manage a restaurant in
defendant’s hotel. Things did not go well, and the parties entered into a separation agreement. That
agreement contained language referencing release provisions therein, and even included a section
including “Release” in its title. Nowhere, however, was there any actual release language.

The panel held plaintiff had not released its claims against defendant. “Releases can be general
or specific, and the scope of releases is a subject of frequent litigation,” the panel said. “It is
impossible to interpret a release without any express language present.” Furthermore, it said,
“releases are strictly construed against the benefitting party and must spell out the intention of the
parties with great particularity. We will not read a release into a contract where one is not expressly
provided.”

Dana Hotel also teaches that contract drafters should draft integration clauses with care. In
Dana, the clause provided that the separation agreement superseded all prior agreements “with
respect to the subject matter hereof.” The panel held that the management agreement (under which

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Sharp Thinking is an occasional newsletter of Sharp-Hundley, P.C. addressing developments in the law which may be of interest. Nothing contained in Sharp Thinking
shall be construed to create an attorney-client relation where none previously has existed, nor with respect to any particular matter. The perspectives herein constitute
educational material on general legal topics and are not legal advice applicable to any particular situation. To establish an attorney-client relation or to obtain legal advice on
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