Artificial intelligence is reshaping every industry, but the biggest risks rarely come from the technology itself. They come from the contracts that govern how the system is trained, how it uses your data, and what happens if something goes wrong. Most AI vendor agreements are one-sided, vague, or missing core protections that businesses expect in any other technology deal. Asking the right questions early is the difference between a productive partnership and a long-term exposure.
This article offers the practical, high-value questions that business leaders, operators, and in-house counsel should ask before signing with an AI provider. These questions are structured around the areas where companies most often lose leverage: data rights, system behavior, ownership, liability, and exit planning.
Core Questions to Ask Every AI Vendor
- Data Access and Use
- What specific categories of our data will your system collect, store, or infer.
- Will any of our data be used to train or improve your models for other clients.
- If training is required, can it be restricted to our own models or our own environment.
- What logs, metadata, or derivative datasets will you retain if we terminate the contract.
- Confidentiality and Sensitive Information
- How do you prevent our data from being incorporated into general training sets.
- Will your system generate outputs that could reveal another customer’s confidential information.
- Can you certify that data deletion includes backups, shadow environments, and third party processors.
- Accuracy, Bias, and System Behavior
- What error rate is typical for the system in our use case.
- How do you monitor for drift, bias, and unexpected behavior.
- Will you provide documentation that shows your quality assurance processes.
- What obligations, if any, are you placing on us to prevent misuse.
- Liability and Indemnification
- If the system produces a harmful or inaccurate output, what liability are you assuming.
- Does your indemnity cover claims related to training data, hallucinations, or defamation.
- Are damages artificially capped at contract value, even if our exposure is higher.
- What insurance do you carry that covers AI specific risks.
- Ownership and IP Rights
- Who owns the prompts, fine-tuning data, custom instructions, and outputs we create.
- If the model is hosted in your environment, can we export fine-tuned versions on termination.
- Are we permitted to use outputs for commercial purposes without restriction.
- Security and Compliance
- How do you protect prompts and outputs that contain confidential information.
- What regulatory frameworks do you follow, and can you demonstrate compliance.
- Do you use subcontractors or processors who will have access to our data.
- Exit and Vendor Lock-In
- If we end the contract, how long do you retain our data, embeddings, or tuned parameters.
- What assistance will you provide to support migration to another provider.
- Can we require deletion of all traces of our data, including training derivatives.
- Operational Integration
- How much human oversight does your system require to operate safely.
- What monitoring tools and dashboards will we receive.
- If your system makes a recommendation, will it be clear that it is the system and not our employee.
Why These Questions Matter
Most businesses do not realize that many AI contracts silently give vendors expansive rights to data, limit their liability to a negligible amount, or disclaim responsibility for the accuracy of outputs. Regulators in California, Colorado, the EU, and other jurisdictions are already increasing scrutiny, and the controls you negotiate today will determine your compliance profile tomorrow.
The goal is not to make negotiations adversarial. The goal is clarity. Responsible vendors can answer these questions without hesitation. Vendors who cannot usually reveal that the risk is higher than the price suggests.
If you want a structured, practical assessment of your AI vendor contracts, we offer an AI Vendor Agreement Risk Review designed to identify exposures and prepare your team for negotiation.
