In-House Counsel Face AI Contract Pressures
In-house counsel are experiencing pressure as businesses deploy new AI capabilities and encounter unfamiliar commitments, according to a conversation with John Pavolotsky, a technology transactions attorney at Stoel Rives. Pavolotsky advised drafting contracts based on the current regulatory landscape and potential changes in the next six to twelve months, as businesses seek clear risk answers in an uncertain environment. This pressure stems from the fact that AI technology advances faster than laws, forcing legal teams to adapt quickly or risk falling behind their companies’ pace, as highlighted in the Dealbreaker article.
The Shifting Regulatory Terrain
The regulatory environment for AI is a moving target, with California featuring dozens of AI-related bills and the EU AI Act categorizing systems into risk tiers that affect U.S. companies. States like California serve as laboratories for governance, experimenting ahead of federal frameworks, and in-house lawyers must align their strategies with regulations intersecting their business operations. According to Dealbreaker, this volatility means building contracting strategies that can withstand changes, as a stable AI regulatory landscape remains years away.
High-Risk AI Use Cases and Market Focus
High-risk AI applications are clearly defined in the EU AI Act and the Colorado AI Act, including areas like education, housing, financial services, and government services that impact livelihoods. Many in-house counsel know if their company’s products or internal uses touch these areas, but operational gaps often exist, such as whether organizations have mapped AI use cases or if workflows flag high-risk systems. According to the Dealbreaker source, addressing these internal clarity issues allows legal teams to lead effectively rather than wait for regulatory certainty.
Changes in AI Contracting Practices
AI is fundamentally software, but contracting for more agentic AI systems shifts the risk model, moving beyond traditional SaaS elements like availability and SLAs to questions of autonomy, delegation, and accountability for unanticipated actions. For instance, Pavolotsky discussed a potential AI travel concierge that could autonomously book flights and coordinate services, highlighting how current contract clauses may fail under such scenarios. In-house counsel should anticipate these shifts, as experimenting with AI tools is essential for understanding their mechanics and risks, according to Dealbreaker.
