Resource allocation in these environments, where both providers and consumers are selfish agents, presents numerous challenges since the number of consumers and their resource demand is highly dynamic. While numerous auction-based approaches have been proposed in the literature, this paper explores an alternative approach where providers and consumers automatically negotiate resource leasing contracts. Since resource demand and supply can be dynamic and uncertain, we propose a distributed negotiation mechanism where agents negotiate over both a contract price and a decommitment penalty, which allows agents to decommit from contracts at a cost. We compare the results of applying this mechanism with existing resource allocation methods that have been deployed on the cloud. We also show that this method of resource allocation by coalition-formation of the machines on the cloud leads not only to better resource utilization but also higher request satisfaction