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What is a Privacy Clause in a Contract?
A privacy clause is a contract provision within a legal contract that explains how a party collects, uses, and discloses a customer’s data. These clauses are most often used by websites that collect personal data from those who use the website and are meant to protect users' privacy.
Personal information that is covered by a privacy clause often includes:
- Names
- Addresses
- Birthdays
- Contact information
- Financial records
- Medical information
- Marital status
- Race
- Religious beliefs
If you have a website that collects user data, a privacy clause is required by law. Almost everyone who uses the internet has agreed to a privacy clause at some point. Yet, many people ask, “What is a privacy clause?”
As a result of regulations like the European Union’s GDPR and California’s CPPA, privacy clauses are required by law for any party that collects personal data. The clause should inform customers of what kind of information is collected, how it is stored, and whether the data collected is kept confidential.
This website has more information on privacy clauses.
Purpose of a Privacy Clause
The purpose of a privacy clause is to protect the privacy of a party who uses a service that collects personal information and protects the company managing the data.
A privacy policy informs customers what information is collected and how it is used and stored. It reminds users that they have privacy rights that should be protected.
For the company, the privacy clause offers legal protection. Suppose the clause is detailed and written correctly. In that case, it will protect a company from legal action by users who have agreed to the clause.
Privacy clauses may increase transparency, but the law and third-party services also require them. So, for example, if you have a website or app that collects and processes data, you must have a privacy policy for your customers.
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How Do You Write a Privacy Clause?
An effective privacy clause will be clear and easy to understand. However, it is recommended that you seek the assistance of a contract lawyer who specializes in privacy clauses to ensure that the provisions in your contract meet the requirements of all privacy laws.
The privacy clause should be separated from other legal agreements on your website or app. It should be clearly labeled as a privacy clause, with the word “privacy” in the title to avoid confusion for your customers.
Your privacy clause needs to be accurate and current when describing the collected information and how it is used. The clause should also include any third parties who also receive the data.
The privacy policy should be posted on your website or app, so it is easily accessible for users to find and read if they have questions regarding your policies.
What's Included in a Privacy Policy?
Privacy policies will differ depending on the applicable laws, business type, and the type of data collected. You must ensure that your privacy policy covers all information that you collect so your users are fully informed about their rights.
Some provisions that are commonly found in privacy policies include:
- The information you collect. Users need to be informed about what kind of information is collected when they agree to your privacy policy.
- How the information you collect is used. A privacy clause needs to inform customers what happens to their data once it is collected. Some websites share user information with third parties, while others only collect information for specific purposes like shipping. Users need to be aware of exactly how collected data will be used.
- How data is protected. When personal data is collected from customers, it must be protected and kept in a secure location. Companies are required to implement security measures and disclose these measures to customers. Data breaches can severely impact customers in legal and financial ways. It is a company’s responsibility to ensure that all personal data is safely stored and managed.
- Data collected from users under the age of 13. If your website or app has users that are under the age of 13, regulations under the Children’s Online Privacy Protection Act (COPPA) impose additional privacy requirements. The privacy clause will have to comply with all COPPA regulations.
- How financial or credit data is handled. Financial and credit data requires more privacy protections than other personal data. There are additional laws that will govern your privacy policy if your website or app collects financial information. Your company and written policy must comply with all laws applicable to financial privacy. Privacy of financial data is essential to protect users from fraud.
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The use of third-party services.
If your website or app uses third party services who receive user information, your users must be informed. Third party privacy policies may be different from yours and your customers need to know how their data will be used and distributed. Some examples of third-party services include:
- A third-party credit card processor that receives financial data to run payments
- A third-party messaging service that collects contact information like phone numbers and email addresses
- Third party cookies that collect information like website activity, login credentials, and browser settings
If your website or app utilizes third party services, you need to provide the name of third party and explain why it is used.
If you are drafting your own privacy policy, it is important to have your document reviewed by an attorney who has experience with privacy policies. Only an experienced attorney can ensure that your privacy clause and provisions contain the right information to protect both your customers and your company.
Who Needs a Privacy Policy?
Suppose you have a website or app that collects personal information from users. In that case, you are legally required to have a privacy policy. Global privacy laws require privacy policies. The law also requires that your privacy policy be posted on your website, easily accessible for customers to review.
Get Help with a Privacy Clause
Do you need help with a privacy clause? If so, post a project in ContractsCounsel’s marketplace to receive flat fee bids from contract lawyers to handle your project. All lawyers on the ContractsCounsel’s platform are vetted by our team to make sure you are provided with top tier service.
ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.
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