Cloud agreement risks: evaluation and mitigation strategies
When entering a cloud-computing service agreement, it's essential to ensure that the contract is well-structured and covers all necessary aspects to protect both parties. Here are some key clauses that should be included in a comprehensive contract.
Data Transition
The contract should include detailed exit/transition provisions that specify the vendor's obligations for cooperation, data handover in a usable format, timelines, and minimizing downtime during transition in or out of the service. Responsibilities for data backups and restoration after termination should also be clearly defined to avoid data loss.
Privacy
A robust Privacy Policy and a Data Processing Agreement (DPA) aligned with data protection laws such as GDPR or HIPAA should be incorporated into the contract. These documents govern data use, processing, ownership, and breach notification.
Security
The cloud provider's adherence to recognized security standards (e.g., ISO 27017) and required preventive measures, encryption mandates, breach detection and rapid notification, and remediation commitments should be specified.
Termination
Clear termination conditions (for convenience, breach, or expiration), notice periods, effects on access, data retention or deletion responsibilities post-termination, and any suspension rights should be defined. Avoid one-sided termination clauses that leave the customer vulnerable.
Compliance with Third-Party Platforms
The cloud service provider should be required to maintain compliance with relevant third-party IP, licensing terms, and regulatory frameworks. Obligations around third-party risk management and use of third-party software or platforms should also be stated.
Communication of Problems
Establish protocols for incident reporting, escalation paths, communication timelines for outages, breaches, and other service issues with mandatory breach notifications.
Cloud Uptime Guarantees and Service Level Agreement (SLA)
Define measurable uptime commitments (e.g., 99.9% availability), support availability, remediation steps, and clearly state remedies including service credits or compensation mechanisms when SLAs are not met.
Service Credits
Include specific mechanisms for financial or service-credit remedies linked to SLA failures, with transparent calculation methods, claim procedures, and limitations.
In summary, a comprehensive SaaS or cloud contract must include strong, balanced clauses on service scope, SLAs, data security, privacy, exit rights with data portability, termination procedures, compliance obligations, and dispute/resolution communications. Contracts should avoid vague or one-sided terms by insisting on detailed roles and responsibilities, especially around data ownership, backup, and transition, backed by recognized standards and enforcement remedies for downtime and data breaches.
Other important aspects to consider include a transparent Privacy Policy and confidentiality provisions, adequate security measures for stored data, and clear procedures for communicating and escalating problems. Wrapper agreements, which are increasingly popular in IT corporate law for streamlining complex transactions and minimizing legal expenditures, do not typically cover the specifics of software development or SaaS services.
It's also worth noting that the most common types of software development contracts are time and materials, fixed bid, fixed budget, and capped budget with accelerated bonus. SaaS agreements should not be titled as an End User License Agreement (EULA) to avoid implying certain rights to the software, and the contract should include termination procedures for serious breaches by either party, with a definition of a "serious" breach.
- To ensure a balanced and comprehensive cloud-computing agreement, it's crucial to include provisions for technology such as service scope, Service Level Agreements (SLAs), data security, privacy, exit rights with data portability, termination procedures, compliance obligations, and dispute/resolution communications.
- In the realm of data-and-cloud-computing, it's essential to incorporate privacy legislation like GDPR or HIPAA and technology standards like ISO 27017 into the contract, ensuring clear responsibilities for data backups, security, and breach notifications.
