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Notes on the Main Issues of Cloud Computing Contracts (prepared by the UNCITRAL secretariat, 2019)

Part two. Drafting a contract

G. Changes in services

Cloud computing services are by nature flexible and fluctuating. The elasticity, scalability and on-demand self-service characteristics of cloud computing services are usually enabled through many contractual options that the customer may use to adjust the consumption of services according to its needs. This prevents the need for renegotiation of the contract each time the customer requires a change in the consumption of services.

The provider in turn may reserve the right to adjust its service portfolio at its discretion. Different contractual treatment may be appropriate depending on whether changes concern the core services or ancillary services and support aspects. Different contractual treatment may also apply to changes that might negatively affect services as opposed to changes that lead to service improvements (e.g., a switch from a standard offering to an enhanced cloud computing offering with higher security levels or shorter response times). The consequences of some unilateral changes of the terms and conditions of the contract by the provider may be severe for the customer, in particular translating into high costs of migration to another system.

Changes in price

The provider may reserve the right to unilaterally modify the price or price scales. The parties may agree to specify in the contract the pricing methodology (e.g., how frequently the provider can increase prices and by how much). The prices may be capped to a specific consumer price index, to a set percentage or to the provider's price list at a given moment. The contract may provide for advance notice of a price increase and the consequences of non-acceptance of the price increase by the customer.

Upgrades

Although upgrades may be in the customer's interests, they may also cause disruptions in the availability of cloud computing services since they could translate into relatively high downtime during normal working hours even if the service is to be provided on a 24/7 basis. The parties may agree on advance notification to the customer of pending upgrades and the implications thereof and that upgrades, as a rule, will take place during periods of little or no demand for the customer. The contract may also provide for procedures for reporting and solving possible problems.

Upgrades may have other negative impacts, for example, requiring changes to customer applications or information technology systems or the retraining of customer users. The contract may provide for the allocation of the costs arising from upgrades. The parties may also agree that the older version of the provided service should be retained in parallel with the new version for an agreed period of time in cases where significant changes are to be made to the previous version, in order to ensure the customer's business continuity. The contract may also address assistance that may be offered by the provider with changes to customer applications or information technology systems and with retraining of the customer's end users, when required.

Degradation or discontinuation of services

Technological developments, competitive pressure or other causes may lead to the degradation of some cloud computing services or their discontinuation with or without their replacement by other services. The provider may reserve in the contract the right to adjust the service portfolio offering (e.g., by terminating a portion of the services). Discontinuation of even some cloud computing services by the provider may, however, expose the customer to liability to its end users.

The contract may provide for an advance notification of those changes to the customer, the customer's right to terminate the contract in the case of unacceptable changes and an adequate retention period to ensure the timely reversibility of any affected customer data or other content. Some contracts prohibit modifications that could negatively affect the nature, scope or quality of provided services, or limit permissible changes to "commercially reasonable modifications".

Notification of changes

The providers' standard terms may contain an obligation on the provider to notify the customer about changes in the terms of services. If not, customers may be required to check regularly whether there have been any changes in the contract. Documents forming the contract may be numerous (see above under Contract form). Some may incorporate by reference terms and policies contained in other documents, which may in turn incorporate by reference additional terms and policies, all of which may be subject to unilateral modification by the provider. Those different documents may not necessarily be hosted in one place on the provider's website. Changes introduced by the provider to the contract may therefore not be easy to notice.

Since the continued use of services by the customer is deemed to be acceptance of the modified terms, the parties may agree that the customer will be notified of changes in the terms of services sufficiently in advance of their effective date. The parties may also agree that the customer will have access to audit trails concerning the evolution of services and that all agreed terms and the definition of the services by reference to a particular version or release will be preserved.

Relevant Glossary terms

Cloud computing services: online services characterized by:

  1.       Broad network access, meaning that services can be accessed over the network from any place where the network is available (e.g., through the Internet), using a wide variety of devices, such as mobile phones, tablets and laptops;
  2.       Metered delivery, allowing usage of the resources to be monitored and charged by reference to level of usage (on a pay-as-you-go basis);
  3.       Multi-tenancy, meaning that physical and virtual resources are allocated to multiple users whose data are isolated and inaccessible to one another;
  4.       On-demand self-service, meaning that services are used by the customer as needed, automatically or with minimal interaction with the provider;
  5.       Elasticity and scalability,meaning the capability for rapidly scaling up or down the consumption of servicesaccording to the customer's needs, including large-scale trends in resource usage (e.g., seasonal effects);
  6.       Resource pooling,meaning that physical or virtual resources can be aggregated by the provider in order to serve one or more customers without their control or knowledge over the processes involved;
  7.       A wide range of services from the provision and use of simple connectivity and basic computing services (such as storage, emails and office applications) to the provision and use of the whole range of physical information technology infrastructure (such as servers and data centres) and virtual resources needed for the customer to build its own information technology platforms, or deploy, manage and run customer-created or customer-acquired applications or software. Infrastructure as a service(IaaS), platform as a service (PaaS) or software as a service (SaaS) are types of cloud computing services.

Downtime or outages: The time when the cloud computing services are not available to the customer. That time is excluded from the calculation of uptime or availability. Time for maintenance and upgrades is usually included in downtime. It may be defined in the service level agreement (SLA) as a number of permissible outages of a specified time duration for a given period, e.g., not more than one outage of one hour per day and not between 8:00 and 17:00.

Reversibility: The process for the customer to retrieve its data, applications and other related content from the cloud and for the provider to delete the customer data and other related content after an agreed period.