On the Applicability of the Common European Sales Law to some Models of Cloud Computing Services

Abstract

The draft Regulation on a Common European Sales Law (CESL) proposes the introduction of a sui generis regime for the implied terms in contracts for the supply of digital content. The question which this article explores is how far that regime might extend to cloud computing contracts with an EU element.

Because CESL is an opt-in law, those who draft the terms for cloud contracts (almost always cloud service providers) will only choose to adopt the CESL regime if it has advantages over choosing a single national law. There are many potential advantages, in particular the reduction of uncertainty whether a choice of law is valid, and what the implied terms might be under that national law. Additionally, there would be no need to localise contracts for those countries where a different choice of national law risks being invalid. But these advantages will only be achieved in reality if CESL makes adequate provision for cloud transactions.

Unfortunately the CESL’s definition of digital content is simultaneously both too vague, and too specific. It is vague because it relies on concepts like “supply” and “access” whose definitions are themselves not clear, and excludes “mixed purpose” contracts. Thus there is real uncertainty how far cloud services which make available streamed content can fall within the definition, and whether a bundle of services which, for example, includes both digital content together with the tools to generate new content therefrom, might be excluded as being mixed purpose. The definition is too specific because it concentrates on the method of delivery, rather than the nature of the content and the purpose for which it is made available. If the content made available falls outside the definition, then the choice of CESL is invalid and there is no choice of law at all – the worst possible result!

Our proposed solution is to recognise that technical certainty is unachievable in a field of activity which is changing so rapidly. Mixed purpose contracts should not be excluded, and instead the test should be whether the primary purpose of the contract is to supply digital content. “Supply” should be left undefined in technical terms, but instead defined in terms of the ability of the customer to use the content in a similar way to which the customer could use goods. The vagueness thus deliberately introduced could be clarified by means of regularly updated guidelines as to the meaning of “digital content”.  This might reduce the uncertainties to a level which would persuade cloud service providers to adopt CESL for their EU-related cloud contracts.