In this video, we look at how cloud contracts are formed and what they contain. Cloud contracts are typically formed online. A provider's website usually has pages that describe its services, as well as pages that set out its standard contractual terms, which may also be called the terms of service or ToS. In most cases, a customer can go to the website, open a new account, and start using a service pretty much straight away. A key part of the setup process, however, is accepting the provider's standard terms, typically by clicking on an 'I agree' button during the sign-up process. This is also called the 'clickwrap' method of contract formation. The resulting contract consists of a set of often lengthy documents which are incorporated into the contract by reference. For example, a typical cloud contract might include the main terms of service document, a privacy policy, and sometimes also a data processing addendum, both dealing with data protection issues, a service level agreement, an acceptable use policy, and in some cases, separate law enforcement access guidelines. Together these documents make up the cloud contract and, in total, there can be a lot of words! For example, Facebook's complete set of contract terms tackles over 33,000 words, which is about 10 percent longer than Shakespeare's play Hamlet. Now of course not all customers will actually read all those terms. You might wonder, has there really been a meaningful agreement as to the contract? Well, under English law, if a party signs a contractual document they will normally be bound by its terms. It's not necessary for the customer to read all of the terms. What's required is that the provider gave the customer sufficient notice of the terms before the contract was signed. And English courts have found that a reference to standard terms on a website can be sufficient to incorporate those terms into a contract. So, as long as the customer's had the opportunity to view the terms, they will normally be bound by the contract. Wait, is that fair? From a customer perspective, it might indeed seem harsh. Cloud providers typically aren't willing to negotiate terms with most customers. Consumers, small to medium-sized businesses, and indeed, many larger organizations are presented with the provider's terms on a take it or leave it basis. Since the provider has written the standard contract, the terms typically favour the provider. Now the customer may not like all of these terms, but if they want to use the service, they have to accept them. What's more, if all major providers offer similar contract terms, then the customer doesn't really have much choice. Yet from a provider's perspective, standard contracts make a lot of sense. A cloud provider makes a uniform service available to a wide range of customers on a one-to-many basis and the service is priced as a commodity product. It's just not feasible to negotiate specific terms with each customer. Instead, offering the service on a single set of binding terms is efficient for everyone. Further, standard contract terms generally give the parties legal certainty. What does this all mean in practice? Well, in the end, English law presents a compromise between the interests of customers and providers. On the one hand, customers are generally bound by the provider's standard terms. But on the other hand, the provider's freedom to dictate terms is limited in two important ways. First, under consumer protection law, most unfair standard terms will not be binding on consumers. Second, the Unfair Contract Terms Act subjects certain terms in standard contracts between businesses are subject to a reasonableness test. We'll cover both of these issues in more detail later.
