Précis Businesses are unaware of terms in cloud computing contracts which in effect hold them liable for failures by the cloud supplier.

What? A recent research study by Queen Mary University of London has revealed that a significant proportion of cloud computing providers, when entering into supply contracts, have attempted to shift liability for any damage that may be caused onto the customer.

So what? Many cloud service contracts have clauses that may have a negative effect on the rights of customers. We would encourage businesses to review any contracts they have with cloud computing suppliers for any unfair terms or clauses that may be hidden within the contract to understand the risks involved and mitigate those risks where possible.

The research identified five common unfair terms prevalent in such contracts and customers are advised to look out for them when reviewing or entering into agreements with cloud service providers:

  • Exclusions and limitations of liability – a service provider may exclude or deny any liability for lost or damaged data;
  • Unsuitable Service Levels Agreements – service levels offered by the provider should match and be appropriate for the customer's organisation;
  • Security and privacy – where the cloud computing service involves any processing of personal data then it will need to comply with UK and European data protection laws. It is not always clear where the data is stored and so customers may inadvertently breach data protection laws. Customers should insist that storage and processing of personal data by the provider will comply with relevant laws;
  • Contract lock-ins – customers should avoid the pitfalls of being locked in to a contract by ensuring there are suitable exit provisions in place to terminate an agreement and the ability to be able to move data to a new provider; and
  • Right to change features without notice – it is common in cloud service contracts for providers to reserve the right to change any service of the feature unilaterally and without notice. Whilst some cloud providers may be unwilling to enter into lengthy negotiations, customers should attempt to negotiate that any change to the service features should be notified at the minimum.