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A contract is a mutual agreement, between multiple parties, that permits or forbids specific behaviour. Cloud computing contracts are most similar to outsourcing software licenses, as such contracts allow for provisions for being off-site, however there are slight changes catering for distributed architectures and a SaaS business model.

With traditional software licenses permission is given to use a copy of a software product, provided by the licensor. This software is not owned by the licensee, however they are allowed to use it as long as they pay their license fee and abide by the terms of the contract. Traditional licensing agreements need to be adapted to suit the distributed one-size-fits-all nature of cloud computing, this modified contract is called a Service Agreement. Service Agreements allow users access to the software and define many different criteria around which the service will be provided. As cloud computing services are provided over the internet, Service Agreements are not concerned with transferring ownership of the software, like with traditional software licenses.

There are several types of Service Agreements that govern the relationship between cloud computing providers and users: the Terms of Service, Service Level Agreement, Acceptable Use Policy, and Privacy Policy. The Terms of Service (ToS) is the main document, which details the Terms and Conditions of the relationship between the customer and the provider. The ToS includes any commercial clauses, legal disclaimers, and references to all other terms and condition documents. The Service Level Agreement (SLA) specifies the level of service that will be provided by provider to its customers, and the compensation customers will receive if these service...

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...r third parties for other services which they require. Therefore because the customer doesn’t have a direct contract with the third parties directly they are affected by the operations of the third party. In such a situation the customer is reliant on the service provider to have adequate contracts which they enforce if anything was to go wrong.

Auditing is also a practice which was common with traditional software contracts where customers were allowed to audit their suppliers they outsource any services too. For a cloud computing service however, this is not as easy as there is no set physical location of service as the data is probably stored in a data centre which is replicated all over the world for redundancy. Also, opening up a company for audit would breach the privacy of all other customers which use the service and also store their data with the provider.
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