Here’s what’s included in this week’s newsletter:
QUICK TAKE
How Vendor Documentation Becomes a Trap Door in Your AI Indemnity
Every indemnity answers a single question: what claims are covered? In AI agreements, the answer often turns on the vendor's documentation, a document you may not have read and the vendor may later rewrite. That is where liability quietly widens, and where a careful reader can close the gap. But when the indemnification provision’s scope is tied the vendor's documentation, the vendor can make changes that narrow the scope without amending the contract or notifying the customer.
That concept is not new. We have anchored indemnities to outside documents for a long time. But with AI products, we are facing greater risks. Now customers are negotiating for a product that they may not fully understand with an indemnified scope that is shifting at the vendor’s discretion.
AI CONTRACT LESSON
How to Negotiate AI Product Testing Provisions
This week's lesson breaks down why the standard AI testing clause leaves customers exposed. Words like "periodic," "industry standards," and "disparate impact" sound protective but give the vendor all the room. Olga Mack and Linsey Krolik walk through what to require instead: a clear testing schedule, a named methodology, and results you actually receive. Comes with a two-page PDF desk reference.
FREE CONTRACT TRAINING
Upcoming CLE Webinars
How to Contract is taking a two week hiatus from our webinar programs. Our next webinar will be on July 14. Register today by clicking the link below:
OUR SPONSOR
Spellbook’s Biggest Thing Yet: Autonomous Contract Management
Spellbook just announced its launch of Autonomous Contract Management. It’s the first AI system that powers contracts end-to-end. From the moment a deal lands in your inbox to the day it renews years later, Spellbook’s AI supports legal teams at every step.
Behind every rocket launch, FIFA game, and datacenter, lies a web of hundreds of agreements. Agreements are the invisible threads that allow us to work together. We have mature infrastructure for finance, eCommerce and other business functions. But contract infrastructure is sorely lacking. This bottlenecks us all.
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Radar (coming later this year): Spellbook can monitor your agreements for risk 24/7.
The world runs on contracts. And contracts run on Spellbook. Sign up for early access with the link in the comments.
MEME OF THE WEEK
Which Image Do You Identify With the Most?
There aren't a lot of places in the world for people like us.
The ones who obsess over hyperlinked terms and whether the PO has precedence over the sales quote.
The ones who get all worked up because the counterparty explained edits by saying it's their policy or it's market standard.
The ones who saved their jobs by conquering the involuntary eye roll in response to random comments like how the company's signature policy doesn't apply to them.
If that's you, I know where you're be accepted and surrounded by others like you.
Come to ContractsCon. Be with your people.
CONTRACT TIPS
Drawing a Blank When Your Counterparty Wants an Example
Today's contract tip is about drawing a blank when your counterparty requires you to provide an example to justify your contract revision.
I consider myself to be a very skilled contract negotiator, but there's one situation where I regularly fall short. It was coming up with real-world examples of how specific language I wanted would play out in different scenarios.
The counterparty would say, "You revised X provision to say Y. I will only consider it if you can give me a specific scenario in the future where the Y is critical to the project."
I was like a deer in the headlights, staring ahead with my mind drawing a blank. At least until the next day when the perfect answer came to me while I was in the shower or eating breakfast.
Don't get me wrong. This request is completely fair and reasonable. And that fact made me even more frustrated with myself when it happened.
What I realized way later in my career is that my failure wasn't some ineptitude on my part. It's just that my brain doesn't function that way. It's hard for me to switch gears from discussing of the words and deal at hand to dreaming up theoretical scenarios.
Here are three techniques I used when I was in this situation:
1. Delay. I'd say, "I need to think about it a bit. Let me get back to you on that." If I can come up with one later, problem solved. If I can't, I move to technique 2 or 3.
2. Change the focus. I'll refocus the discussion. "That's a valid point. I know you want to have some specifics about how this could play out. But in the end, we need to find some common ground. Maybe we can work on the words and find a revision that makes it work for both of us."
3. Refuse. You don't have to agree to the request to come up with a scenario. The other side can ask, but it takes two to tango. I typically only use this tactic with aggressive counterparties. "I understand your ask, but I am not ready to start coming up with theoretical situations. This revision is important to us. If you can't agree to it at this moment, let's table it for a later point in the discussion."
Do you ever find yourself in this situation? What approach do you take when you can't come up with a scenario as requested by the other side?
🥸 Here are a few more contract tips I recently posted on LinkedIn:
Let us know if you have any questions or feedback by replying to this email or email us directly at [email protected]. We are so grateful for our amazing contracts community.
All my best,
Laura Frederick, Founder and CEO @ How to Contract
