Your Business Is Using AI. You Have Already Signed an Agreement. Do You Know What It Says?

The adoption of artificial intelligence across professional and commercial industries has accelerated at a pace that most legal frameworks have not kept up with. Law firms are using AI to research, draft, and analyze documents. Dental and medical practices are using AI-powered management systems to handle scheduling, communications, and patient records. Businesses of every kind are integrating these tools into their daily operations because the efficiency gains are real and the competitive pressure to keep pace is significant.

What is happening far less consistently is the legal work that should accompany that adoption. Every AI tool your business uses was made available through an agreement, whether a formal contract, a terms of service, or an acceptable use policy that appeared on a screen between signing up and getting started. That agreement governs the relationship between your business and the vendor. It defines who owns the data your business enters into the system, what liability the vendor accepts if something goes wrong, and what obligations your business takes on simply by using the tool. In the vast majority of cases, those agreements were never reviewed by anyone with legal training before your business clicked accept.

That is not a failure of diligence. It is the reality of how software adoption works. But it is also where significant and often unrecognized legal exposure begins.

What AI Vendor Agreements Are Actually Designed to Do

AI vendor agreements are written by the vendor's legal team, for the vendor's benefit. That is not a cynical observation. It is simply how commercial contracts work. The vendor's objective is to make its product available as broadly as possible while limiting its own liability as narrowly as possible. The result is an agreement that transfers the majority of legal and financial risk to the business using the tool.

Three areas of these agreements warrant particular attention for any business that takes its legal exposure seriously.

Data ownership and permissible use. When your business uploads client files, patient records, internal communications, or proprietary business information into an AI system, that data enters the vendor's environment and becomes subject to the vendor's terms. Many AI vendor agreements grant broad rights to use, process, and in some cases retain that data for purposes that extend beyond the immediate service your business is paying for. Understanding precisely what rights your vendor has over the information your business contributes is not a technicality. It is a foundational question about your obligations to the clients, patients, and partners who trusted your business with their information.

Liability allocation when the AI produces a harmful result. Artificial intelligence systems make errors, and when those errors affect the people your business serves, the question of who bears responsibility becomes immediately consequential. A legal AI tool that generates a flawed contract provision that later becomes the basis of a dispute. A patient management system that produces an error affecting the course of care. In these scenarios, most vendor agreements cap or eliminate the vendor's liability entirely, leaving your business as the party your clients and patients will look to for accountability. The agreements and disclosures your business has in place with the people it serves are often the most critical line of legal protection your business has in those moments.

Data breach responsibility and notification. Client and patient data that your business enters into a third-party AI system lives on infrastructure your business does not control. When a vendor experiences a security incident, your business is frequently the entity with direct notification obligations to affected individuals, regulatory bodies, and in some cases contractual counterparties. The question every business should be able to answer in advance is what those obligations look like, whether your current client and patient agreements address how data incidents are handled, and whether your business has the internal framework in place to respond appropriately when that situation arises.

The Legal Framework Your Business Still Needs to Build

Reviewing an existing vendor agreement is the starting point, but it is not the complete picture. The more significant gap for most businesses is the absence of a coherent legal framework governing how AI is used within the organization and how that use is communicated to and protected against the people the business serves.

On the internal side, businesses need written policies that define which AI tools are authorized for use, what categories of information employees and staff are permitted to enter into those systems, and what the boundaries are around client, patient, and confidential business data. Without that framework, the use of AI within your organization is effectively ungoverned, and the exposure that creates falls directly on the business when a question arises about how a particular piece of information was handled.

On the client-facing side, the issue is equally significant. If your business uses AI as part of how it delivers services, the people receiving those services have a reasonable expectation of understanding how their information is being used and what protections are in place. Most client agreements, patient intake forms, and customer-facing terms of service were drafted before AI was part of the picture. They say nothing about it. That silence creates ambiguity that does not serve your business when a dispute arises, a regulatory inquiry is initiated, or a client raises a concern about how their information was handled.

The businesses that are best positioned in this environment are the ones that have addressed all three layers: what they agreed to with their vendors, how AI use is governed internally, and what their clients and customers have formally acknowledged about how that technology is used in serving them.

A Shifting Regulatory and Commercial Environment

The regulatory attention on AI is no longer prospective. The Federal Trade Commission has taken enforcement action against companies that misrepresented how AI handles consumer data. Healthcare regulators have scrutinized providers who allowed patient information to flow into AI systems without appropriate safeguards. Employment regulators are examining how AI is being used in personnel decisions. The legal standards applicable to AI use are developing across multiple regulatory frameworks simultaneously, and businesses that have not begun building a legal foundation around their AI adoption are increasingly exposed as those standards take shape.

Beyond regulatory considerations, the commercial dimension is equally important. Clients, patients, and business partners are becoming more sophisticated in the questions they ask about data handling and technology use. The business that can respond to those questions with clear, written policies and agreements is in a fundamentally stronger position than the one that cannot. Trust, once lost over a data or technology issue, is difficult to recover.

How Squire Moore Approaches AI Legal Readiness

Squire Moore advises businesses on the full scope of legal work that responsible AI adoption requires. We begin by reviewing the vendor agreements your business has already signed or is in the process of evaluating, identifying the provisions that carry the most significant risk and translating the legal language into a clear picture of what your business has actually agreed to and where its exposure lies.

From there, we work with businesses to develop internal AI use policies that reflect how the organization actually operates, what tools are in use, what data flows through those tools, and what boundaries need to be in place to protect clients, patients, and the business itself. These policies are tailored to the specific tools your business uses and the specific obligations your industry imposes.

Finally, we draft or update the client-facing agreements, terms of service, and customer-facing documents that address AI use directly, ensuring that the people your business serves have formally acknowledged how their information is handled and that your business has the written protections it needs if a dispute or inquiry arises.

The goal is not to slow down your use of AI. It is to ensure that the legal foundation your business operates on is as sound as the technology it has chosen to build on.

This article is for general informational purposes only and does not constitute legal advice. Every situation is different. If you want to discuss your business's specific situation, we would love to help. Contact us at contact@squiremoore.com or visit squiremoore.com to learn more.