Cloud Computing, Clickwrap Agreements, and Limitation on Liability Clauses: A Perfect Storm?

By: Timothy J. Calloway

“To the cloud!” trumpets a commercial by Microsoft, whose aim is to herd customers, and their checkbooks, into the cloud computing fold. But Microsoft, and other cloud providers like Amazon and Google, might inadvertently be doing just the opposite. It is not for lack of security or even early adopter apprehension that potential customers might turn away. Nor is it a lack of fantastic, cost-saving applications of cloud technology.

Rather, the problem is buried deep within these tech giants’ clickwrap agreements—the ones that customers rarely read and to which they invariably click “I Agree.” Hidden in these agreements are limitation on liability clauses, veritable safe harbors for cloud providers and submerged icebergs for the unwary cloud customer. Often, these clauses wholly abrogate a customer’s right to recover damages for his provider’s wrongful acts. In other words, a provider could purposefully delete its customers’ data or shut down its users’ websites, leaving the aggrieved customers with no cause of action and no right to recover.

While limitation on liability clauses are not new to the contract law vernacular, their inclusion in cloud computing agreements is particularly troublesome. The amount of potential liability that customers may waive through a half-cocked click is as enormous as it is troubling. While courts have recently held that these clauses are enforceable in other Internet-related areas, courts should be wary of blindly applying precedent and enforcing these clauses in the cloud computing context.

Cite: 11 Duke L. & Tech. Rev. 163

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