AI CONTRACT CHECKLIST

This checklist examines performance warranty provisions in AI product contracts, including accuracy standards, the warranty period, the sole remedy, and the exclusion for modified prompts. The provisions provided in this checklist are samples and not model language to use in your contracts.

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Sometimes I'm so clever in my contract drafting that no one else can understand what it says. That takes real talent.

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CONTRACT TIP

This contract tip is about what to do when a vendor’s performance starts to go downhill. Most customers don’t want to terminate. They want the vendor to fix the problem.

Some contracts include service levels to incentivize better performance, but that’s not the only approach.

Here are some other ways for customers to manage problems without terminating the agreement:

1. More people - The customer could require that the vendor assign more people to help fix a specific problem or just as additional resources to do the work. Another option is for the customer to assign some of its personnel to fix the issues at the vendor’s expense.

2. Different people - The customer also could require the vendor to change the people performing the work. The customer would insist that the vendor replace some or all of the assigned personnel.

3. More oversight - The customer could require the vendor to provide more frequent and comprehensive reporting. The customer could go from quarterly to monthly or even daily updates on what the vendor is doing to fix the problem.

4. Rights to take over - The most drastic approach is to allow the customer or another vendor to step in and take over performance. Essentially, the vendor would pay for someone else to do the vendor’s job.

What other mechanisms have you seen in your contracts?

PS - Apologies to all the wonderful vendors who do an amazing job despite trying circumstances. We could just as easily switch this over to a customer that never made a mistake and performed all its obligations exactly as and when required.

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