Harper James is a modern, full-service UK commercial law firm advising ambitious businesses on commercial contracts and licensing under the laws of England and Wales. For an AI licence, the central task is to define exactly what is being licensed, to whom, for which purposes and with what restrictions.
The contract should identify the model, software, application programming interface, documentation, datasets and related services covered by the licence. State whether the customer receives a limited right to access the service, a licence to install software, or rights to modify, integrate and sublicense it. Set out authorised users, territories, usage limits, commercial and research purposes, account controls, and rules for combining the AI with the customer’s own systems. Review the supplier’s rights to update, retrain, suspend or replace the model, particularly where changes affect functionality, pricing or compliance. Further reading on current commercial law topics can help place these terms in a wider contract review process.
A well-drafted agreement separates customer inputs, supplier technology and generated outputs. It should state who may use each category, whether inputs are retained or used to train models, and how personal data is handled. Data processing terms should cover roles, security measures, international transfers, subprocessors, deletion and assistance with data subject rights where UK GDPR applies. Outputs also need careful treatment. The contract should address ownership or permitted use, confidentiality, restrictions on submitting sensitive information, and the fact that generated material requires human review for accuracy, originality and third-party rights. If the AI processes regulated, confidential or safety-sensitive material, the parties should document approval, testing and escalation procedures.
Key risk clauses include warranties about authority, service performance, security and legal compliance, together with specific indemnities for intellectual property infringement, confidentiality breaches or misuse of data where appropriate. The limitation of liability should distinguish ordinary service failure from higher-risk events such as unauthorised disclosure, infringement, fraud or deliberate misconduct. Include service levels, incident notification, audit rights, records, business continuity and support obligations. Termination rights should cover repeated service failures, security incidents, unlawful processing, insolvency and material changes to the AI service. On termination, specify transition support, export or deletion of data, continued access to records and the treatment of stored outputs.
The contract should also include a governance schedule that names decision-makers, records permitted use cases, sets review dates and requires notification of material model or legal changes. Before signing, map the proposed workflow against confidentiality, intellectual property, data protection, sector regulation and procurement requirements. That approach gives the business a usable allocation of responsibility rather than relying on broad assurances about artificial intelligence.