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UK consumer protection regulator identifies unfair cloud services terms

Sue McLean, Morrison & Foerster | June 3, 2016
Some cloud contracts may violate UK consumer protection law

Termination/Suspension

Providers may also wish to give themselves flexibility to suspend and terminate services. However, again this may be unfair. Providers should:

  • only terminate without notice if the consumer commits a material breach of contract or there is a real risk of harm or loss to the provider if the contract continues;
  • clearly and narrowly define the circumstances in which the provider may suspend or terminate the contract or service with notice;
  • give consumers adequate notice of suspension or termination (except where there are serious grounds for immediate suspension or termination without notice);
  • give consumers a reasonable opportunity to remedy minor or potential breaches before the service or contract is terminated or suspended by the provider; and
  • allow consumers to obtain a pro-rated refund of any prepayments if the service or contract is suspended or terminated by the provider and the consumer is not at fault.

Exclusion and limitation of liability

Exclusion and limitation of liability clauses often raise questions of fairness. CMA recommends that providers should:

  • not exclude or limit a consumer's statutory rights and remedies under the CRA, (e.g., not exclude or limit liability for a failure to provide the service with reasonable skill and care, or in accordance with the service description);
  • not unreasonably limit or exclude liability, e.g. include an unreasonably low cap;
  • clearly set out the circumstances when liability will not be excluded, as well as explaining any applicable limitations or restrictions; and
  • avoid unnecessary 'legal jargon'. For example, familiar terms that state that liability is excluded to the extent permitted by law" are potentially unfair because it may be impossible for a consumer to know, without expert legal advice, what liability is or is not excluded by law.

Law and Jurisdiction

Often because providers operate on a global basis they want to create uniform terms and conditions that specify their home country or state as the default choice of law. However, to be compliant with UK consumer law, the terms must allow for consumers to bring legal proceedings in their local courts and for local law to apply.

Transparency

Providers must make their terms clear and comprehensible to enable consumers to make informed choices. In particular, providers should: (i) draft terms in plain English, (ii) use short sentences, (iii) use easily understood subheadings and cover similar issues in the same section, (iv) ensure disadvantageous terms are given appropriate prominence, (v) minimise cross-reference to other terms or documents; and (vi) ensure terms do not just name regulatory or legal provisions, but actually explain the effects of those provisions.

Lastly, on the positive side, despite concerns expressed by some consumers in terms of data security and privacy, the CMA identified little evidence of actual security or privacy problems with cloud storage services.

 

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