May 2012

Ok, I need to define a term first.

‘Strategic uncertainty’ =  when a party to say a cloud services agreement intentionally tries to create an ambiguity in a clause, so they can later use it for their benefit (in a dispute of course).

Look agreements are all about certainty and rules, so any type of uncertainty is generally not a good thing. However, it is near to impossible to be clear on everything (even if you try to), but if I were you I would make sure you are clear about at least these three issues.

 

1) It is All About the Money. You should be clear about how much, when and for how long your customer is committing to your     service.

2) Restrictions of the Service. You should be clear about any restrictions of your cloud service (for example, maybe your customer should not access your service other than through a documented interface…if that is the case).

3) Disclaim Unique Risks. You should be clear about any unique risks of your cloud service that your customers should be aware of  (for example,​ you do not guaranty compliance with say a certain law, even though your service helps them to comply with the law).

 

Oh yea, do you want an example of what a strategic uncertainty looks like. Well, here is one: “The customer must pay all undisputed invoices within 30 days.”   

Now this seems reasonable on its face, as if the invoice …

3 Things to Consider When Drafting Your Cloud Services Agreement

While there are a lot of things you should think about when drafting your cloud services agreement, here are 3 things you should definitely think through.

1) Clarity.  While not all lawyers agree, I think cloud services agreement in particular should be drafted as clear as possible. Why you ask? Well, your customers want to understand your model and what they are committing to, and so the quicker you can communicate it the better (oh yea, your cloud services agreement is really part of that communication process). Remember, that as you are providing something that is intangible, so communication, consistency and clarity are really important. 

2) Transparency. Keep in mind that you want to communicate not only the easy issues, but if there are important (difficult) issues you need to address, then you have to address them. Being totally transparent helps, because when you are providing a service remotely over the Internet ‘trust is a huge issue’ (and transparency helps to build that trust).

3) Avoid Breach of Contract. You want to be careful about what obligations you take on, as you don’t want to find yourself in breach of the agreement.  Try to only commit to obligations that are ‘in your control’ or you ‘can influence the outcome of.’  Why does it matter? Well, you generally (except for indemnities) don’t have liability under an agreement unless you are in breach. So in general you don’t …