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Cloud Expo: Article

Ignoring the Harmless Looking “Force Majeure” Clause in a Cloud Agreement?

Maybe it's not so harmless....

“Force Majeure” – An event that is a result of the elements of nature, as opposed to one caused by human behavior.

This nugget is a common clause in contracts that essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties, such as a war, strike, riot, crime, or an event described by the legal term “act of God” (such as hurricane, flooding, earthquake, volcanic eruption, etc.), prevents one or both parties from fulfilling their obligations under the contract.

Having a landscaper or electrician be excused from performing his services due to a hurricane is reasonable, and not an objectionable use of a force majeure clause in a contract with one of these types of service providers.  Many cloud service providers would also want you to believe that it’s reasonable for them too, along with their uptime service level guarantees. Should you?

We’ll assume that your cloud service provider is providing you with a spiffy service level uptime guarantee.  If your company has done its due diligence with the cloud service provider, you’ve learned about their business continuity and disaster recovery plans to give you comfort about how the provider will handle a disaster.    You’re feeling pretty good that if there is an outage, you’ll be entitled to receive credits against the monthly service fee your company is paying the provider.

But wait – you notice that the provider has also included a force majeure clause in its contract, which may read something like this:

“Provider shall not be deemed to be in breach of this Agreement and shall have no liability hereunder if its obligations are delayed or prevented by any reason of any act of God, war, terrorism, fire, natural disaster, accident, riots, acts of government, shortage of materials or supplies, failure of any transportation or communication system, non-performance of any of your agents or your third party providers (including, without limitation, the failure or performance of common carriers, interchange carriers, local exchange carriers, internet service providers, suppliers, subcontractors) or any other cause beyond its reasonable control.”

So now, in the event of nearly any event outside of the provider’s reasonable control which affects the system’s uptime, the force majeure clause has just swallowed any right your company had to receive a service credit for the downtime.  Your company can avoid this problem by either negotiating the removal of this clause from the contract, or to create exceptions for the granting of service credits in the event of a force majeure event.  Careful planning can ensure that a couple of Latin words don’t destroy your company’s rights under service level guarantees.

More Stories By Dan Pepper

Dan Pepper is the managing member of Pepper Law Group, LLC, a boutique technology law firm, and has spent nearly 20 years in the information technology law field, including acting as in-house counsel for Oracle Corporation. He presents at conferences worldwide on the legal risks associated with cloud computing.