Sharing confidential information between two companies

Question

I own a small company and submitted a proposal to a major company and I received no response. Another company considered my proposal and invited me to present the proposal to the board.

I was asked if I have submitted this proposal anywhere else, and I said no. A board member was an employee of the first company, and shared my letter to the first company with the board. And then, the board decided to reject the proposal because I was not honest with them.

As I checked, there is no official connection between two companies. In other words, he shared my letter based on his personal knowledge rather than official relationship between two companies.

My proposal was intended for the first company, and I do not see any legal ground for sharing it with a third party. I did not write "confidential" on my letter, but I assumed a business proposal is automatically considered as a confidential material.

How is the legal situation here?

Answer 1

I did not write "confidential" on my letter, but I assumed a business proposal is automatically considered as a confidential material.

An incorrect assumption unfortunately. Unless you have a confidentiality agreement (NDA) with the first company, they and their agents are not under any legal obligation to keep information you share with them confidential.

How is the legal situation here?

There is none on your side. You lied about a direct question asked and were caught in the lie. Company A had no obligation to keep what you sent confidential. Even if they did, that may not (depending on how the confidentiality agreement is worded) keep the employee of company A stating that they had received the same proposal.

Chalk this one up to a lesson on confidentiality and honesty in business. There are no reasonable assumptions of confidentiality in business unless you specifically state that they are confidential or are provided as part of a confidentiality agreement.

Answer 2

The deliberate misrepresentation that you had not submitted the proposal anywhere else reasonably causes the board to doubt that you meet the presumed covenant of good faith that is prerequisite for the formation of a contract.

In this sense, you breached the contract in its incipient state, and therefore the board has no duty to comply with its otherwise reasonably expected obligations toward you. The official/personal/dual capacity of the individual who discovered the misrepresentation is irrelevant.

You wrote:

I do not see any legal ground for sharing it with a third party. I did not write "confidential" on my letter, but I assumed a business proposal is automatically considered as a confidential material.

It is valid for you to decline providing the board with any details of the proposal. The worst possible scenario is that at some point the board might ask you to be forthcoming with it as a condition to remain in the bidding process. But one thing is to procure confidentiality about an event, and another one is to falsely deny that such event happened at all. Moreover, the word "confidential" on a letter or statement does not add "truth" to a deliberate falsehood.

Lastly, taking legal action for the person's disclosure of your letter would be detrimental to yourself because the board and/or the individual could viably countersue you for attempt of fraud.