20 April 2020

Key contractual considerations for data centres dealing with the impact of Covid-19

From dealing with data storage, processing, streaming services, telecoms, social media and much more, data centres have become an integral part of global economies. As people stay at home, the reliance on data centres has scaled up drastically.

What are the key contractual considerations?

Force majeure

Will my business or customer have the right to trigger a force majeure clause for Covid-19, thus altering a party’s obligations under the contract? This is the number one question on the lips of most directors and the answer, in short, is that it depends on several factors.

If the clause/ contract refers to ‘disease’ or ‘pandemic’, the chances of relying on the clause are much higher than where the more common wording of ‘acts of God’ or ‘circumstances beyond the party’s reasonable control’ are used. Further considerations include proving the causal link between the coronavirus pandemic and the delay or failure in performing an obligation.

Detailed guidance is available here.

Supply chain

It is important for data centres to review the level of control they have over the supply chain. Whilst most data centres will have an abundance of back up options, the long-term impact of the pandemic are still to be seen. Expansion projects could also be affected.

Termination

Data centre need to check whether customers have any termination rights which need to be reviewed in light of the global pandemic.

Hardship clauses

If the contract becomes too onerous or expensive to perform, check that you have a hardship clause protecting you.

Insurance

Policies should be checked to see if losses relating to the pandemic are covered.

Applicable law

Consider whether the obligations to comply with the applicable law include government guidance.

Escalation

If there are obligations for the parties to meet on a regular basis to discuss contractual considerations, make sure that you know how often this has to occur and whether it can be done through conference calls, video-conferencing etc.

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About the Author
Mohammed Toqeer, Solicitor

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