The vendor paper started from a position that protected the model provider on every one of the four red lines, and the rushed deals accepted all four
Speed is not the same as advantage. The gaps signed away in the first wave became real problems inside a year, as models were deprecated and outputs were challenged.
Prepared by Redress Compliance · August 19, 2026 · GenAI contracts. 25 to 35 contracts reviewed, 2024 to 2025.
Executive summary
Indemnity gaps: 50 to 70 percent of first drafts capped or carved out the intellectual property indemnity. A low cap turns indemnity into a gesture.
Training ambiguity: 40 to 60 percent left training on customer data unclear or permitted by default. The binding statement has to live in the contract, not on a marketing page.
No swap rights: fewer than a third granted deprecation notice or version pinning. A silent model change breaks applications overnight.
Regulatory duties were left unallocated. Obligations neither side owns are a liability gap that surfaces only after something has gone wrong.
What indemnity should the contract actually include?
Vendor indemnity for third party intellectual property claims arising from model output, without a cap or carve out that hollows it out. The major providers publish commitments, but scope and conditions vary, so it is a negotiation rather than a given.
Three things that gut an indemnity
- Carve outs: exclusions that remove the core claim you were worried about.
- Caps: a low ceiling turns the protection into a gesture.
- Conditions: guardrail and unmodified output requirements have to be workable in practice.
Read the conditions, not the headline
An indemnity that evaporates the moment you fine tune or filter is not real protection. Compare the published positions, such as one provider's business terms and another's commercial terms, against your actual risk before signing.
How should your inputs and outputs be handled?
Barred from training entirely, stated explicitly, with deletion and retention terms attached. The red line is a contractual guarantee that your data never trains shared or foundation models.
| Red line | Vendor default | Buyer position | Why it matters |
|---|---|---|---|
| Intellectual property indemnity | Capped or carved out | Uncapped for such claims | Output may infringe |
| Training data | Sometimes permitted | Never on your data | Confidentiality and ownership |
| Model swap | No notice | Notice and version pinning | A silent change breaks applications |
| Regulatory duty | Unallocated | Explicitly assigned | Compliance liability |
A marketing page is not a contract
Vendors document enterprise data handling publicly, for example on an enterprise privacy page, and 40 to 60 percent of first drafts still left the position unclear or permitted by default. The binding statement has to be in your agreement.
The enterprise AI contract negotiation guide
The four red lines, the clause language that holds them, and the buyer side moves across a GenAI estate.
Get the brief →What 25 to 35 GenAI contracts showed
Across roughly 25 to 35 GenAI contracts Morten Andersen reviewed between 2024 and 2025, the vendor paper started from a position that protected the model provider on every one of the four red lines. Three patterns recur.
- Indemnity gaps: 50 to 70 percent of first drafts capped or carved out the intellectual property indemnity.
- Training ambiguity: 40 to 60 percent left training on customer data unclear or permitted by default.
- No swap rights: fewer than a third granted model deprecation notice or version pinning.
Every one of the four defaults is a drafting position rather than a market standard. All four moved when they were named as red lines up front.
- Every risky clause flagged with the verbatim quote and page anchor
- Percentile standing for your exact deal size and industry, from real closed transactions
- Paste ready replacement language and an evidence trail for the response
Why do swap and deprecation rights matter?
Because the provider can retire or alter the model your application depends on. Without notice periods and version pinning, a silent change breaks outputs and compliance overnight.
The clause that converts a forced change into a managed one
Negotiate a guaranteed deprecation notice and a transition window so a new model can be tested before it becomes mandatory. That single term is the difference between a migration and an incident.
Fewer than a third of first drafts had it
It is the least granted of the four red lines and the one most likely to be dismissed as theoretical, right up until the version an application was built against is withdrawn.
Watch the briefing · 4:33Negotiating the Enterprise AI ProvidersWhat the vendor paper protects, which four terms actually move, and how to keep an alternative credible.
What do the new regulatory duties add?
Obligations assigned by risk tier across providers and deployers, which means the contract has to say who carries which duty.
Three allocations to name explicitly
- Risk tier: confirm how your use case is classified.
- Provider duties: documentation and transparency from the vendor.
- Deployer duties: your own obligations as the operator.
Unallocated is not unowned
An obligation neither side named is a liability gap that surfaces only after something goes wrong. The documentation and transparency requirements are set out in the regulation text, and naming the owner of each in the contract costs nothing at signature.
Where the common advice on GenAI contracting is wrong
The common advice is to sign the vendor paper quickly so you do not miss the productivity wave. We disagree.
The rushed deals paid for the speed within a year
Across the contracts reviewed, the rushed deals accepted capped indemnity, ambiguous training rights and no model swap protection, and those gaps became real problems as models were deprecated and outputs were challenged.
The buyer side move is to hold the four red lines, accept a shorter term to preserve optionality in a fast moving market, and keep a credible alternative model in view. The lock in question is worked through in the lock in assessment and the renewal sequence in the renewal strategy.
What the contracts measured, 2024 to 2025
Two cuts of the review file, both describing the opening position rather than the settled one.
On intellectual property claims arising from model output, which is the risk the indemnity exists to cover.
On customer inputs and outputs, with no explicit contractual bar and no deletion or retention terms attached.
Both are opening drafts rather than final positions. Naming them as red lines before the first redline is what moved them.
Your first five moves
- Name the four red lines before the first draft is exchanged, because the vendor paper opens protected on all four and moves when they are named up front.
- Read the indemnity conditions, not the headline commitment, since 50 to 70 percent of drafts capped or carved it out and the conditions are where it evaporates.
- Get the training bar into the contract with deletion and retention terms, because a published privacy page is not a binding statement.
- Negotiate deprecation notice and version pinning with a transition window, which fewer than a third of first drafts granted at all.
- Assign every regulatory duty by name and take a shorter term. The GenAI practice holds the four red lines before the productivity argument closes the conversation.
Frequently asked questions
What are the four red lines?
Intellectual property indemnity, training on your data, model swap and deprecation rights, and the allocation of regulatory duties between provider and deployer.
How often is the indemnity capped?
In 50 to 70 percent of first drafts reviewed, either capped or carved out on exactly the claims the protection exists to cover.
What hollows out an indemnity?
Carve outs that remove the core claim, a cap low enough to make it a gesture, and conditions that fail the moment you fine tune or filter the output.
What should the training term say?
That your inputs and outputs never train shared or foundation models, stated explicitly, with deletion and retention terms attached to it.
Is a published privacy page enough?
No. Vendors document enterprise data handling publicly, and 40 to 60 percent of first drafts still left the contractual position unclear or permitted by default.
Why do swap rights matter?
Because the provider can retire or alter the model your application depends on, and without notice and version pinning a silent change breaks outputs overnight.
How often are swap rights granted?
In fewer than a third of first drafts. It is the least granted of the four and the one most often dismissed as theoretical until a version is withdrawn.
What do the regulatory duties require?
Obligations assigned by risk tier across providers and deployers, which means the contract has to name who owns the documentation and transparency duties.
Should the term be long or short?
Short, to preserve optionality in a fast moving market. A long term locks the four positions you accepted at a moment when the market is still repricing them.
Does moving fast pay off?
Not in the contracts reviewed. The rushed deals accepted all four vendor defaults, and those gaps became real problems within a year.
