Where the Market Is Heading – Tech & Sourcing @ Morgan Lewis

Shift in AI Contract Practices: Two years ago, AI inclusion in agreements was minimal, but now its integration has made generic disclaimers inadequate.
SaaS Framework Adaptation: Traditional SaaS frameworks for AI are facing shifts due to the emergence of agentic AI, requiring more rigorous terms in service descriptions and performance warranties.
Key Negotiating Points in AI Contracts:
- Scope and Service Definitions: Detailed descriptions of AI workflows and decisions to prevent misunderstandings.
- Performance Standards and Warranties: Commitments on performance benchmarks and accuracy are becoming necessary where AI impacts core business processes.
- Intellectual Property Ownership and Output Rights: Attention to output ownership, customer data rights, and vendor data usage for model improvement is crucial.
- Regulatory Compliance Allocation: Clear assignment of regulatory compliance responsibilities and consequences of penalties is essential.
Transition and Termination Planning: Provisions for data handling, model extraction, and transition assistance during contract wind-downs are vital and often under-addressed.
Specific AI Risk Integration: Instead of generic disclaimers, embedding AI risk into contract specifics for data governance, liability, and service levels enhances contract effectiveness.

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