AI Model Development Agreement

AI MODEL DEVELOPMENT AGREEMENT

AGREEMENT DATE: [__/__/____]

PROJECT NUMBER: [PROJECT-NUMBER]

Complete each applicable blank and checkbox. Strike or mark nonselected alternatives as not applicable.

PARTIES

CLIENT:

• Legal Name: [CLIENT LEGAL NAME]
• Address: [FULL ADDRESS]
• Contact: [NAME, EMAIL, PHONE]

DEVELOPER:

• Legal Name: [DEVELOPER LEGAL NAME]
• Address: [FULL ADDRESS]
• Contact: [NAME, EMAIL, PHONE]

ARTICLE 1: PROJECT OVERVIEW

1.1 Project Description

Developer shall develop the following AI/ML model(s) for Client:

Project Name: [NAME]

Model Purpose: [DESCRIBE THE BUSINESS PROBLEM AND INTENDED USE]

Authorized Users and Use Environment: [________________________________]

Prohibited or Out-of-Scope Uses: [________________________________]

Model Type:
☐ Classification model
☐ Regression/prediction model
☐ Natural language processing model
☐ Computer vision model
☐ Recommendation system
☐ Generative AI model
☐ Other: [SPECIFY]

1.2 Technical Specifications

Detailed specifications in Schedule A, including:

• Model architecture requirements
• Performance metrics and thresholds
• Input/output specifications
• Integration requirements
• Scalability requirements

1.3 Deliverables

ARTICLE 2: DEVELOPMENT PROCESS

2.1 Project Phases

Phase 1: Discovery and Planning

• Requirements gathering
• Data assessment
• Feasibility analysis
• Project plan development

Phase 2: Data Preparation

• Data collection/acquisition
• Data cleaning and preprocessing
• Feature engineering
• Data validation

Phase 3: Model Development

• Model architecture design
• Training and validation
• Hyperparameter tuning
• Performance optimization

Phase 4: Testing and Validation

• Performance testing
• Bias and fairness testing
• Integration testing
• User acceptance testing

Phase 5: Deployment and Handover

• Deployment preparation
• Documentation
• Training
• Support transition

2.2 Milestones

2.3 Change Management

Changes to scope require:
☐ Written change request
☐ Impact assessment
☐ Mutual agreement on revised scope, timeline, and fees
☐ Signed change order

ARTICLE 3: DATA PROVISIONS

3.1 Client Data

Client shall provide:
☐ Training data as specified in Schedule B
☐ Validation data
☐ Test data
☐ Data documentation

Data Delivery Timeline:
| Dataset | Format | Volume | Due Date |
|---------|--------|--------|----------|
| [DATASET 1] | [FORMAT] | [SIZE] | [__/__/____] |
| [DATASET 2] | [FORMAT] | [SIZE] | [__/__/____] |

3.2 Data Quality Requirements

Client warrants data meets:
☐ Quality standards in Schedule B
☐ Completeness requirements
☐ Accuracy requirements
☐ Format specifications

3.3 Data Rights

Client represents, subject to the disclosures and allocations in Schedule D:
☐ Client has identified the source and provenance of each dataset
☐ Client has the rights and permissions it is relying on to provide and authorize the agreed uses of each dataset
☐ Required notices, consents, approvals, contracts, and restrictions have been documented
☐ Known third-party license, confidentiality, privacy, publicity, and use restrictions are listed in Schedule B or D

3.4 Developer Data Use

Developer may use Client data only for:
☐ Developing the Model under this Agreement
☐ Not for training other models
☐ Not retained after project completion
☐ Subject to confidentiality obligations

3.5 Data Governance and Security

The Parties shall complete Schedule D before any data transfer. It must identify:

• data categories, sources, owners/controllers, processors/service providers, and authorized users;
• permitted purposes and prohibited secondary uses;
• required security controls, access restrictions, locations, transfers, subprocessors, and incident-notification timing;
• retention, return, deletion, backup, and verification requirements; and
• any human-subject, child, biometric, health, financial, employment, education, government, confidential, or export-controlled data restrictions.

Developer shall not use production data until the applicable Schedule D gates are completed and approved by both Parties.

ARTICLE 4: PERFORMANCE REQUIREMENTS

4.1 Performance Metrics

The Model shall meet the following performance thresholds:

4.2 Fairness Requirements

The Model shall meet fairness requirements:

The Parties shall define why each metric, threshold, comparison group, dataset, and tradeoff is appropriate for the intended use. No metric or threshold in this Agreement is represented as a universal legal safe harbor.

4.3 Acceptance Criteria

Model acceptance requires:
☐ Performance metrics met on test dataset
☐ Fairness requirements satisfied
☐ Documentation complete
☐ Integration testing passed
☐ Client user acceptance testing passed

Acceptance establishes contractual conformance only. It does not establish legal compliance, absence of bias, fitness for an unlisted use, or safety under conditions outside the agreed evaluation protocol.

ARTICLE 5: INTELLECTUAL PROPERTY

5.1 Client Materials

Client retains ownership of:

• Client data
• Client-provided specifications and requirements
• Client business processes and know-how

5.2 Model Ownership

SELECT ONE:

☐ Option A: Client Owns Model
Developer hereby assigns to Client, at the agreed transfer point stated below, all of Developer's right, title, and interest in the following custom-developed items:

• Trained Model (including weights)
• Model architecture (to extent custom-developed)
• Training code and scripts
• Documentation

Developer retains rights to pre-existing tools and general know-how.

Transfer point: ☐ upon creation ☐ upon payment in full ☐ other: [________________________________]

Developer shall obtain written obligations from personnel and approved subcontractors sufficient to perform the selected assignment and shall deliver reasonable evidence on request.

☐ Option B: Developer Owns Model, Client License
Developer owns the Model. Client receives:

• [Exclusive/Non-exclusive] license
• [Perpetual/Term] license
• Scope: [SCOPE]
• Territory: [________________________________]
• Transfer, sublicense, modification, hosting, and derivative-use rights: [________________________________]

☐ Option C: Joint Ownership
Use only with a counsel-completed schedule addressing each Party's exploitation, licensing, enforcement, accounting, improvement, transfer, and termination rights: [________________________________]

5.3 Pre-Existing Materials

Developer's pre-existing materials remain Developer's property. For any such material incorporated in a Deliverable, Developer grants Client the following license:

• Exclusivity: [NON-EXCLUSIVE / EXCLUSIVE]
• Duration: ☐ perpetual ☐ through [__/__/____] ☐ other: [________________________________]
• Territory: [________________________________]
• Permitted use, reproduction, modification, hosting, transfer, and sublicense rights: [________________________________]

The license must be no narrower than necessary for Client to exercise its selected rights in the Deliverables. Any contrary limitation must be listed here: [________________________________]

5.4 Open Source

Developer shall:
☐ Identify all open-source components used
☐ Ensure compliance with open-source licenses
☐ Not introduce "copyleft" open-source without approval

5.5 Third-Party Models, Data, and Services

Developer shall identify in Schedule D every third-party model, model weight, API, dataset, synthetic-data source, annotation service, evaluation tool, and hosted service used in the project, together with the governing terms, usage restrictions, attribution duties, pass-through requirements, change risk, and exit plan.

ARTICLE 6: DOCUMENTATION

6.1 Required Documentation

Developer shall provide:

☐ Model Card including:

• Model description and intended use
• Training data summary
• Performance metrics
• Limitations and risks
• Ethical considerations

☐ Technical Documentation including:

• Architecture documentation
• API specifications
• Integration guide
• Deployment instructions

☐ User Documentation including:

• User manual
• Administrator guide
• Troubleshooting guide

☐ Source Code Documentation including:

• Code comments
• README files
• Build instructions

ARTICLE 7: TESTING AND ACCEPTANCE

7.1 Developer Testing

Developer shall conduct:
☐ Unit testing
☐ Integration testing
☐ Performance testing
☐ Bias/fairness testing
☐ Security testing

7.2 Acceptance Testing

Client shall have [____] days to conduct acceptance testing.

Acceptance Process:

1. Developer delivers Model with test results
2. Client conducts acceptance testing
3. Client provides acceptance or rejection with deficiencies
4. Developer remediates deficiencies
5. Client re-tests
6. Repeat until acceptance or termination

7.3 Acceptance

☐ Express written acceptance
☐ Deemed accepted if no rejection within [____] days, but only for the expressly listed acceptance tests
☐ Partial acceptance for individual components

7.4 Rejection

If Model fails acceptance testing:
☐ Developer shall remedy at no additional cost
☐ After [____] failed attempts, Client may terminate
☐ Refund provisions per Section 8.5

ARTICLE 8: FEES AND PAYMENT

8.1 Project Fees

☐ Fixed Price: $[AMOUNT]
☐ Time and Materials: Not to exceed $[AMOUNT]
☐ Milestone-based (see Section 2.2)

8.2 Rate Schedule (if T&M)

8.3 Expenses

☐ Included in fees
☐ Billed separately: [CATEGORIES]
☐ Pre-approval required above $[AMOUNT]

8.4 Payment Terms

• Invoices due within [____] days
• Late payment interest: [%] per month

8.5 Refund

If Client terminates for Developer's material breach:
☐ Refund of fees for undelivered milestones
☐ Pro-rata refund based on work completed

ARTICLE 9: WARRANTIES

9.1 Developer Warranties

Developer warrants:

☐ Performance: Model will meet performance specifications for [____] days/months after acceptance

☐ Conformance: Model will conform to specifications and documentation

☐ Non-Infringement: Model does not infringe third-party IP (to Developer's knowledge)

☐ Professional Standards: Work performed with professional skill and care

☐ No Malicious Code: Deliverables free from viruses, malware, or harmful code

9.2 Warranty Remedies

During warranty period, Developer shall:
☐ Correct defects at no additional cost
☐ Provide reasonable support for issues

9.3 Disclaimer

TO THE EXTENT ENFORCEABLE UNDER THE SELECTED GOVERNING LAW, AND EXCEPT AS EXPRESSLY STATED, DEVELOPER DISCLAIMS IMPLIED WARRANTIES. DEVELOPER DOES NOT WARRANT PERFORMANCE OUTSIDE THE AGREED DATA, TEST CONDITIONS, AUTHORIZED USERS, OR INTENDED USE.

9.4 Model Limitations and Change

The Parties acknowledge that model outputs may be probabilistic and may change with data, prompts, integrations, third-party services, model versions, environment, or user behavior. Schedule A must allocate monitoring, human review, override, logging, incident response, retraining, version control, rollback, and retirement responsibilities.

ARTICLE 10: SUPPORT AND MAINTENANCE

10.1 Initial Support Period

Developer shall provide [____] days/months of support following acceptance, including:
☐ Bug fixes
☐ Technical support
☐ Minor adjustments

10.2 Ongoing Maintenance (Optional)

☐ Not included
☐ Included for [____] days/months at [TERMS]
☐ Available under separate maintenance agreement

10.3 Training

Developer shall provide:
☐ [____] hours of training for Client personnel
☐ Training materials
☐ Additional training available at $[RATE]

ARTICLE 11: CONFIDENTIALITY

11.1 Confidential Information

Each party shall maintain confidentiality of the other's confidential information.

11.2 Client Data

Client data is Client's confidential information. Developer shall not disclose or use except as authorized.

11.3 Duration

Confidentiality obligations survive for [____] years after termination.

ARTICLE 12: LIABILITY

12.1 Limitation of Liability

Subject to governing-law review, select one completed cap or state that no contractual cap applies:
☐ Total fees paid or payable during [____] months before the event giving rise to the claim
☐ $[AMOUNT]
☐ No contractual cap

12.2 Exclusions

☐ If selected and enforceable, neither Party is liable for the following categories: [________________________________]

12.3 Selected Exceptions

If a contractual cap or exclusion is selected, identify any agreed exceptions:
☐ Confidentiality breach
☐ IP infringement or misappropriation
☐ Willful misconduct
☐ Other: [________________________________]

ARTICLE 13: TERM AND TERMINATION

13.1 Term

This Agreement commences on [__/__/____] and continues until project completion or termination.

Estimated Completion: [__/__/____]

13.2 Termination for Cause

Either party may terminate for material breach not cured within [____] days after the notice required by this Agreement.

13.3 Termination for Convenience

☐ Client may terminate for convenience upon [____] days' notice
☐ Payment for work completed through termination

13.4 Effects of Termination

Upon termination:

• Developer delivers work product completed to date
• Client pays for work completed
• Confidentiality and IP provisions survive
• Each Party follows the data return, deletion, retention, transition, license, and third-party-service exit requirements in Schedules B and D

ARTICLE 14: GENERAL PROVISIONS

Governing Law: [JURISDICTION — REQUIRED]

Dispute Resolution and Forum: [MEDIATION/ARBITRATION/LITIGATION; SEAT, COURT, AND VENUE — REQUIRED]

Independent Contractor: The Parties intend an independent-contractor relationship, subject to the actual facts and governing law. This label does not determine worker classification, tax, benefits, agency, or licensing status.

Assignment: No assignment without consent.

Entire Agreement: This Agreement and Schedules constitute entire agreement.

Amendments: Written amendments signed by both parties.

SIGNATURES

CLIENT:

Signature: __________________________________ Date: [__/__/____]

Name: [NAME] Title: [TITLE]

DEVELOPER:

Signature: __________________________________ Date: [__/__/____]

Name: [NAME] Title: [TITLE]

SCHEDULE A: TECHNICAL SPECIFICATIONS

[DETAILED TECHNICAL REQUIREMENTS]

SCHEDULE B: DATA SPECIFICATIONS

[DETAILED DATA REQUIREMENTS]

SCHEDULE C: PROJECT PLAN AND TIMELINE

[DETAILED PROJECT PLAN]

SCHEDULE D: JURISDICTION, DATA, AI, AND SECTOR COMPLIANCE MATRIX

Approval to begin production-data work:

Client: [________________________________] Date: [__/__/____]

Developer: [________________________________] Date: [__/__/____]

This AI Model Development Agreement template is provided for informational purposes only and is not legal advice. Legal and technical review is required before use.