Vendor Risk 2026: The Contract Clauses Tech Businesses Can't Ignore

Tech vendors have never had it so difficult. Between AI integrations, third-party platforms, and increasing privacy expectations, contracts that previously appeared to be air-tight are now subjecting companies to new levels of liability. The question on everyone's mind entering 2026 is "Does this contract still protect us?"

Below are some provisions that all businesses should think about reviewing now, and why vendor contract updates have become a business necessity.

1. Clear AI-Use and Data Clauses

AI technology is becoming integrated in everything from help-desk bots to software-as-a-service (SaaS) analytics. But many vendor agreements still do not outline when and how artificial intelligence is utilized to process client data. Regulators such as the Federal Trade Commission this year reminded companies that using AI without clear disclosure could constitute a deceptive practice. The simplest thing to do is to ensure transparency into the operation of AI tools, what data they access, and whether their outputs are secret or could train off-platform systems. A suggestion is to add a concise provision that defines which tools are AI-based, prevents customer data from being used for model training, and appropriately allocates responsibility for decisions made with AI.

2. Increased Control over Subcontractors and Third Parties

Very few providers act alone today. Cloud providers, data labeling partners, and analytics subcontractors all create downstream risks. Recent changes in privacy law in various states require large vendors to have their partners follow the same security and privacy standards. 

What that means is your agreements must, at a minimum:

• Name all subcontractors that are privy to client data;

• Flow down identical confidentiality and security provisions; and

• Give clients the right to request records or audits.

Having this type of line of responsibility can reassure regulators and clients that compliance extends beyond your own systems.

3. Enlarged Breach-Notification and Response Definitions

Data incidents today encompass everything from network intrusions to exposures of AI models or system driven disclosures. 30-day breach notification periods may no longer be permissible for clients or regulators. Due to the urgency of breaches when they occur, agreement terms should provide for immediate notice, usually 48 to 72 hours, and incorporate mutual support in the investigation. This controls damage management and maintains client trust in the event of a data security issue.

4. Ownership, IP, and Output Rights

Whether a vendor uses AI or automation tools to create deliverables, or creates them wholly independent of technology assistance, the question of who owns the output, content or other deliverables arises. Without a clear written agreement, both the client and the vendor can claim rights to the result.  Therefore, it is crucial that ownership of any deliverables is clearly addressed in the contract, so that whether the deliverable is human-only created, AI or other technology generated, or co-created by human and machine, the client and the vendor have a clear understanding of IP rights to the output.  Likewise, it will be critical to address whether any use rights will be granted to any elements of AI or other technology itself that are embedded in the deliverables. These steps can prevent confusion and potentially costly IP disputes.

5. Why Legal Modernization Matters

For small to mid-size tech vendors, these changes can be intimidating. But updating your contracts now has two significant advantages: it reduces exposure and conveys operational maturity to customers and investors.

Our firm, experienced in technology and compliance, can review your old agreements, align clauses with current privacy and AI regulations, and develop templates that expand as your business grows. The result is your peace of mind and contracts that move with technological advancement, propelling them forward.

Innovation doesn't wait for you to catch up on paperwork. As digital partnerships and AI technologies rapidly advance, outdated vendor jargon has become a critical risk for technology companies. By proactively updating your contracts clearly defining how tools are utilized, who holds responsibility, and where data is stored you are building a solid foundation for future growth and fostering trust. In a fast-paced environment, being legally compliant is not just an obligation; it's a strategic advantage that will set you apart from the competition.