With the rise of “Cloud” computing, there will inevitable be an increase in IT service contracts that are entered into online with very little and sometime no negotiation or contact between the customer and the supplier.
So what are the things to look out for when signing up to an on-line contract?
Online contracts are no different from “normal” contracts, they are still a binding agreement between the parties concerned. There are, however, additional considerations to take into account:
- Jurisdiction – the Internet makes it very easy to provide IT services across geographies, so make sure you understand where the service is being provided from and what Law it is subject to.
- When is the contract formed? – technically the contract is binding once it has been “accepted”, but online contracts may define how this acceptance occurs. Make sure that you know how the contract is accepted, as this will ensure you do not enter into contracts just by clicking on the wrong web link!
- Authority – any contract must be entered into by someone with (or who appears to have) the authority to do so. Therefore, organisations should have procedures in place to ensure that their staff only enter into appropriate online contracts. If the employee appears to have the authority to bind the company, then the contract will probably be binding.
- Terms – the supplier will have “standard” terms for the services, make sure that these are appropriate, pay particular attention to areas such as; Liability, Termination, Payment, Contract Term, Service Levels, Automatic renewals.
- Signature – English law usually allows for a contract to exist without the need for a signature and electronic communication is now normally considered to be “written” communication. So an email would be sufficient as evidence of commitment to a contract, so be careful with the language in emails to avoid committing to a contract when you do not intend to!
There is EU legislation that regulates online contracts and it requires many things, from suppliers providing a non-electronic method of contact, to suppliers acknowledging all orders. However, if you are dealing outside of the EU then these requirements and protections will not apply.
Online contracts are therefore just as complex and improtant as any other contract.
So what should you do with online contracts?
The simple answer is “everything you would normally do and then some more”.
If in doubt, take appropriate Legal advice.
Mike Hill – Head of Commercial Services – Itica Consulting – January 2010
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