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The Legal Implications of Cloud Computing

Tuesday, 12 February 2013

Cloud computing is another huge technological revolution that is changing the way individuals and businesses organise their affairs. Using remote servers hosted on the internet to store and manage data offers exciting benefits and opportunities, particularly for businesses.

The cloud can make stored data more accessible, increase productivity and significantly reduce expenditure. However, there are legal considerations that you should be aware of before placing a significant portion of your business in the hands of a third party.

Check the Contract isn’t Cloudy

It is imperative to thoroughly check the contract that your cloud service provider offers you; failing to do this could place your business at considerable risk. Major cloud services offer a standard form contact – a contract where the terms are decided solely by the cloud service provider – presenting no opportunity to negotiate the contractual provisions according to your business’ needs.

A survey conducted by Cloud Legal Project, which analysed the cloud computing contracts offered by 27 different providers showed that these contracts offered minimal protection. Many of the standard form contracts contained clauses that:

  • Disclaimed responsibility for keeping the stored data intact
  • Reserved the right to terminate the service (meaning a business could potentially lose all of its stored data)
  • Excluded liability for the loss of data

While these provisions might not hold up in court because of EU data protection laws, actually pursuing such a remedy in court would be lengthy, expensive and generally undesirable. Furthermore, many cloud service providers are based in the US and subject to American laws. In that case, a UK-based firm seeking redress would face major logistical as well as legal difficulties.

A Changing Market

The surge in cloud computing has meant that the market is gradually improving. While major cloud service providers such as Google and Amazon continue to offer a low cost service with limited protection, there is a growing awareness of the need to meet the needs of smaller and medium sized businesses.

As a result, business-focused cloud service providers are emerging, offering more protection at affordable costs. These generally allow you to agree on contractual provisions that better suit your business’ needs without foregoing legal protection.


When entering into the world of cloud computing, it is important to exercise the requisite due diligence to ensure that the contract you agree to best suits your business in terms of price and protection. In addition, it is worth considering the jurisdiction in which your provider is based. Finally, before you agree a contract, check your termination clause; rapid development may mean better offers become available in the near future.

Before entering into a cloud computing contract, we recommend that you seek legal advice to ensure that your business is adequately protected. Rollingsons has experienced lawyers who can assist you. For more information please contact James Crichton via e-mail or by telephone on 0207 611 4848.