Drafting and Negotiating Effective Cloud-Computing Agreements

Drafting and Negotiating Effective Cloud-Computing Agreements

With the evolution and development of time, humans have come up with various inventions and discoveries that have changed the shape of the world. One of the biggest inventions was the machine. A machine is a device that was made to make the work of a man easier and faster. Cloud computing is an example of the same. Cloud Computing is the usage of a network that helps one compute any resources and deliver the same to users who need it. Many parties fall under an agreement to provide effective services through cloud computing, and such agreements are legalized by Section 10A of the Information Technology Act, 2000.

To form an effective agreement and to negotiate one, it is essential that both parties agree on terms and conditions beforehand. The agreement that they form shall be detailed, with every aspect covered, without leaving scope for any misunderstandings. Some important aspects that can fall under the agreement that must be discussed and addressed are as follows:

1. Definitions- Like every act has a clause aimed at definitions that might seem different to the reader, the technical terms might cause the same cloud of confusion for someone who is not well aware of the technology. A clause defining certain definitions or acronyms that be used later can be mentioned in order to remove absurdity.

2. Confidentiality- Sharing any form of information via cloud computing can lead to the portrayal and display of sensitive information to both parties. A confidentiality clause can ensure that the information provided should be kept confidential, honoring the trust and goodwill the parties maintain. Any third party to the agreement shall also be familiar with the same and maintain the data security and confidentiality standards that adhere to the industry.

3. Disputes and Jurisdiction- In case of any disputes that might occur during the period of the contract, it is essential that the parties decide the jurisdiction under which the agreement will be enforceable. If the agreement is between an Indian entity and a US-based provider, then the provider and the entity must decide under which country’s laws would they take the dispute and other legal necessities.

    

4. Services- A clause regarding any protection from the unavailability of data under the provider must be mentioned. The unavailability can be due to several underlying issues, such as server repair, connectivity issues, and so on. The protection must make sure that there is a proper backup in case of such hindrances take place. The services provided by the provider must align its services with the needs of the customer. Most importantly, both parties must agree upon certain service levels that are expected, such as up-time service levels, service response time, simultaneous visitors, data return, and remedies.

5. Insurance- Cyber-insurance is a specialty insurance policy intended to protect enterprises and persons providing services to those undertakings from Internet-based risks and more broadly, from risks related to networks in the field of information technology, protection of information, liability for information governance, etc. In case of a data breach from the customer or the provider, a clause regarding insurance must be addressed in order to avoid any form of disputes later. This insurance is there to protect the data of the providers.

6. Indemnification- If the provider breaches its own privacy and data security obligations, then the customer has the right to indemnification. In case of an intentional breach, the customer is entitled to any and every cost taken for the recovery of the data. In case of an unintentional breach, the providers can be provided with a limit to which they can compensate.

7. Fees- A cloud computing agreement can have overall lump sum payments or payments per use. Whichever kind the parties choose, must be inculcated in the agreement. The method of payment, the mode of payment, and the payment pattern. The provider shall keep in mind all the factors that’ll affect the payment. The amount can also include the factor of all the revenue streams of the customer and adjust the fee accordingly.

8. Term of Service- The customer can terminate the service as per their will, but is required to provide a notice with the reasons behind the said termination. The provider may request a minimum commitment period from the customer to recoup the provider’s “investment” in securing the customer as a customer. If the termination of the agreement takes place, then there should be an understanding between the provider and the customer as to what the consequences of termination be.

9. Intellectual Property Rights- This clause of the agreement will specify what intellectual property of which party belongs to and can be used by the other party. For example, the ownership of designs by the provider can be used by the customer with a certain amount of royalty chargeable. Certain intellectual property can be granted under the agreement, and any new creation that is made can also be undertaken by the provider if it is mentioned in the agreement and agreed with.

10. Limitation of Liability- Under this clause, the provider may limit its liabilities by specifically mentioning that any loss that may occur to the customer will not be borne by the provider in any form. There can also be a cap to which the provider can be held liable for any tortious activity, which shall also be specifically mentioned. The rise of such liability can also be mentioned with respect to the time of the contract when this liability arises.

11. Training- Under the clause of training, the provider agrees to provide training to any member of the customer or its entity to provide proper and official training in order to use the cloud computing services efficiently and effectively.

12. Modifications in the Agreement- Any necessary modifications to the agreement can be made by either party upon information through a notice and agreement between the parties. The mode of modifications shall be mentioned, and the time period under which such modification will take place.

13. Miscellaneous- Every agreement has a miscellaneous clause that mentioned sub-clauses that need an understanding and mentioning in order to avoid any form of further disputes.

References

1. AVEVA Cloud Services Agreement. (n.d.). Retrieved November 20, 2020, from https://www.aveva.com/en/legal/cloud-services/

2. Drafting and Negotiating Effective Cloud Computing Agreements. (n.d.). Retrieved November 20, 2020, from https://www.lexisnexis.com/lexis-practical-guidance/the-journal/b/pa/posts/drafting-and-negotiating-effective-cloud-computing-agreements

3. Furtado, R. (2016, September 10). Cloud Computing Agreements – An Overview. Retrieved from https://blog.ipleaders.in/cloud-computing-agreements-overview/

4. MasterSubscription Agreement [PDF]. (n.d.).

5. Seaton, P. (1978). Agreement. Retrieved November 20, 2020, from https://aws.amazon.com/agreement/

BY-

Aditi Goel