3 Things You Should Consider in Your Cloud Services Agreement

May 29, 2012 by

While there are a lot of things a venture capital or startup company should think about when drafting its cloud services agreement, here are three things to definitely consider.

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

2) Transparency: Remember that you don’t want to communicate only the easy issues. If there are important difficult issues you need to address, then address them. You should strike to be as transparent as possible, because when you are providing a service remotely over the Internet trust is a huge issue, and transparency will help to build that trust.

3) Avoid Breach of Contract: You need to be careful about what obligations you take on, because you don’t want to be 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? Because, with the exception of indemnities, you don’t have liability under an agreement unless you are in breach. So, in general, you don’t want to over commit and under deliver.  However, if there are certain obligations you are comfortable committing to, then consider adding them to the agreement, especially if it is something that you customer wants to see included. For example, obligating yourself in the agreement to return the customer data is usually an easy obligation/commitment to take on.

These are three relatively easy things every venture capital & startup company should consider when creating their cloud services agreement.

Do you want a recent example of a clear and transparent agreement? Take a look at the Photobucket Terms of Use. 

Disclaimer: This post is for informational and educational purposes only, and is not legal advice. You should hire an attorney if you need legal advice, and it should only be provided after review of all relevant facts and applicable law.