The implementation and roll-out of generative AI tools and Large Language Models (LLMs) in public and private organisations is occurring rapidly. However, organisations should take a moment to consider whether their template services agreements adequately address the adoption of AI by suppliers.

Public and private organisations are, unsurprisingly, keen to leverage the huge potential of generative AI and LLMs, and the advantages and efficiencies that can be gained from these tools appear to be enormous. However, these types of AI systems can present some unique challenges too. 

For example, organisations need to ensure that they are adequately addressing their privacy compliance obligations and protecting their confidential information properly. Our recently released Digital Transformation 2025 Legal Trends Benchmarking Survey report revealed that 66% of respondents were concerned about the use of AI complying with regulations. There are also fundamental intellectual property considerations that may need to be dealt with when using generative AI and LLMs.

Fortunately, many of these risks can be appropriately managed through contractual mechanisms. 

Public and private organisations should consider whether their contracts with suppliers adequately address the use of AI systems. For example, do your contracts:

• Require suppliers to obtain your approval before they use AI systems in the provision of services?
• Contain clear provisions regarding whether inputting your organisation’s confidential information into an AI system is permissible?
• Allow for human control of any AI system to be retained?
• Contain any controls around what data is used to train the AI system?
• Contain protections against the development of unwanted bias in the AI system?
• Require the supplier to ensure that the AI system does not infringe the IP of any third party when training the system?

Nearly 70% of our digital transformation survey respondents reported being concerned about being impacted by technology-related disputes or litigation. If these questions have raised concerns or you are not sure if your contract documentation adequately protects your organisation, it may be timely to do a thorough review of your template contracts. Maddocks has extensive experience in updating template contracts to appropriately address the adoption and use of AI tools by suppliers.