Notes on the Main Issues of Cloud Computing Contracts (prepared by the secretariat of the United Nations Commission on International Trade Law, 2019)
Part two. Drafting a contract
A. General considerations
Freedom of contract
The widely recognized principle of freedom of contract in business transactions allows parties to enter into a contract and to determine its content. Restrictions on freedom of contracts may stem from legislation on non-negotiable terms applicable to particular types of contract or rules that sanction abuse of rights and harm to public order, morality and so forth. The consequences of non-compliance with those restrictions may range from unenforceability of a contract or part thereof to civil, administrative or criminal liability.
The concepts of offer and acceptance have traditionally been used to determine whether and when the parties have reached an agreement as regards their respective legal rights and obligations that will bind them over the duration of the contract. The applicable law may require certain conditions to be fulfilled for a proposal to conclude a contract to constitute a final binding offer (e.g., the proposal is to be sufficiently definite as regards the covered cloud computing services and payment terms).
The contract is concluded when the acceptance of the offer becomes effective. There could be different acceptance mechanisms (e.g., for the customer clicking a check box on a web page, registering online for a cloud computing service, starting to use cloud computing services or paying a service fee; for the provider starting or continuing to provide services; and for both parties signing a contract online* or on paper). Material changes to the offer (e.g., as regards liability, quality and quantity of the cloud computing services to be delivered or payment terms) may constitute a counteroffer that requires acceptance by the other party for a contract to be concluded.
*For UNCITRAL texts addressing electronic signatures, see the United Nations Convention on the Use of Electronic Communications in International Contracts (New York, 2005), the UNCITRAL Model Law on Electronic Commerce (1996) and the UNCITRAL Model Law on Electronic Signatures (2001). See also an explanatory text prepared by the UNCITRAL secretariat entitled “Promoting confidence in electronic commerce: legal issues on international use of electronic authentication and signature methods (2007)”.
Standardized commoditized multi-subscriber cloud solutions are as a rule offered through interactive applications (e.g., "click-wrap" agreements). There may be no or very little room for negotiating and adjusting the standard offer. Clicking "I accept", "OK" or "I agree" is the only step expected to be taken to conclude the contract. Where negotiation of a contract is involved, contract formation may consist of a series of steps, including preliminary exchange of information, negotiations, delivery and acceptance of an offer and the contract's preparation.
Cloud computing contracts are typically concluded online. They may be called differently (a cloud computing service agreement, a master service agreement or terms of service (TOS)) and may comprise one or more documents such as an acceptable use policy (AUP), a service level agreement (SLA), a data processing agreement or data protection policy, security policy and license agreement.
The legal rules applicable to cloud computing contracts may require that the contract be in writing, especially where personal data processing is involved, and that all documents incorporated by reference be attached to the master contract. Even when written form is not required, for ease of reference, clarity, completeness, enforceability and effectiveness of the contract, the parties may decide to conclude a contract in writing with all ancillary agreements incorporated thereto.
The signing of a contract on paper may be required under the applicable law for specific purposes such as tax purposes, although that type of requirement is becoming rare in an increasingly paperless environment.
Definitions and terminology
Due to the nature of cloud computing services, cloud computing contracts contain by necessity many technical terms. The glossary of terms may be included in the contract, as may definitions of main terms used throughout the contract, to avoid ambiguities in their interpretation. The parties may wish to consider using the internationally established terminology for the purpose of ensuring consistency and legal clarity.
Usual contract content
A contract normally: (a) identifies the contracting parties; (b) defines the scope and object of the contract; (c) specifies rights and obligations of the parties, including payment terms; (d) establishes the duration of the contract and conditions for its termination and renewal; (e) identifies remedies for breach and exemptions from liability; and (f) specifies the effects of termination of the contract. It also usually contains clauses on dispute resolution and choice of law and choice of forum.The content, style and structure of contracts may vary significantly, reflecting various legal traditions, drafting styles, legal requirements and parties' needs and preferences.