What is a Chinese Wall in a Contract? | Attorney Aaron Hall

What is a Chinese Wall in a Contract?

Introduction

In this video, you get answers to these questions:

  • What is a Chinese wall in a contract?
  • What is an example of a Chinese wall in a contract?
  • What is another name for a Chinese wall?

Video Transcript

What is a Chinese wall in a contract? I’m Aaron Hall, a business attorney in Minneapolis, Minnesota. I generally represent business owners and often they ask me, “What does a Chinese wall provision when you find that in a contract? Let me explain what that is. Inside some contracts, there is a provision that says that a Chinese wall or an information barrier will be preserved between divisions of a company. Now usually you see this type of provision when one company is serving two separate companies who compete with each other. Imagine for example a branding agency and the agency provides services to Yahoo and Google. Well, the agency wants to be able to work with both clients, but if, think about it, Yahoo and Google don’t want their internal confidential information somehow being shared or used by the branding agencies employees to help their competitor. So in those situations, there will be a contract with both tech companies, in this example, that says there’ll be an information barrier inside the branding agency.

So that information for Google stays with a few employees who are serving Google, and information for Yahoo stays with a few employees who are working for Yahoo. It won’t be shared among the entire company. This historically has been called a Chinese wall between the parties. However, because of the ethnic aspect of that term, attorneys have been trying to modify that. Sometimes it’s called an information barrier, an ethics wall, or a privacy wall or privacy barrier. The whole idea though is to try to keep isolated within a few people within a company, confidential information that the company receives to do work for the company’s client. This is especially important in government contracts or for companies who are serving competitors. This might even be law firms who are representing two major companies who usually compete but are not conflicted in a particular legal matter where the law firm is helping them. So that quite simply as what is referenced as a Chinese wall or a Chinese wall provision in a contract.

Now because of the ethnic implications of this, typically I’ll call it a confidentiality barrier or a privacy barrier, and then have a parenthetical that says, “Also known as a Chinese wall.” And the reason for that is because there is case law, there’s a lot of history in the legal profession and in the courts in addressing what a Chinese wall is. And so, in contracts where clarity is so important, we want to make sure that whatever term we use for a provision is, it’s really clear. And that is why often there is a reference to a Chinese wall, even among attorneys who are trying to get away from that terminology.

So there you have it. That’s what a Chinese wall is in a contract. For more information on this, see the link in the description below. It links to a blog post I wrote on this at aaronhall.com. You can also find similar videos by subscribing to this video channel or subscribing to our email list. There is a disclaimer below which this video is subject to, and to find out more about me, feel free to check me out aaronhall.com. I’m Aaron Hall, a business attorney in Minneapolis, Minnesota.

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