Draft a Targeted AI Kill-Switch Policy Clause for Enterprise Contracts

EXCERPT — Master Services Agreement between Nordwell Financial Group ("Customer") and Larkspur AI Systems, Inc. ("Provider"), effective 1 March 2026.

Section 4. AI Services.
4.1 Provider will make available the "Larkspur Advisor" platform, a generative AI assistant that drafts client-facing investment summaries using large language models licensed from an upstream model provider ("Upstream Provider"). Provider may substitute the Upstream Provider on 30 days' written notice.
4.2 Provider will use commercially reasonable efforts to maintain 99.5% monthly uptime, excluding scheduled maintenance.
4.3 Customer acknowledges outputs are probabilistic and shall implement human review before external use.

Section 8. Suspension and Termination.
8.1 Either party may terminate for material breach on 30 days' written notice, uncured.
8.2 Provider may suspend the Services immediately if Customer's use threatens the security or integrity of the platform, with notice as soon as reasonably practicable.

Section 11. Notifications.
11.1 Provider will notify Customer of any confirmed security incident affecting Customer Data within 72 hours of confirmation.
11.2 Provider will notify Customer of material changes to the Services at least 15 days in advance.

Section 14. Indemnification.
14.1 Provider will defend and indemnify Customer against third-party claims that the Services, as delivered, infringe a US patent, copyright, or trademark, subject to the liability cap in Section 15.
14.2 Provider's indemnity excludes claims arising from (a) Customer's modification of outputs, (b) combination with non-Provider systems, or (c) use in violation of the Documentation.
14.3 Aggregate liability capped at 12 months of fees paid.

Section 17. Sub-processors.
17.1 Provider's current sub-processors are listed at larkspur.example/subs. Provider will give 10 business days' notice of additions.

## What we got when we ran it

We executed every prompt above, in order, against the sample input (model: claude-sonnet-4-6). Outputs below are real and unedited apart from length truncation.

### Step 1 output

# Structured Summary — Nordwell Financial Group / Larkspur AI Systems MSA (Effective 1 March 2026) --- ## 1. AI/ML Functionality Described Larkspur Advisor is a generative AI platform that drafts client-facing investment summaries for Nordwell Financial Group using large language models sourced from an undisclosed upstream model provider. --- ## 2. Existing Suspension/Termination Rights | Reference | Party | Right | Trigger | Notice | |---|---|---|---|---| | §8.1 | Either | Terminate | Material breach, uncured | 30 days' written notice | | §8.2 | Provider only | Suspend immediately | Customer use threatening platform security or integrity | As soon as reasonably practicable (post-action) | **Key observation:** No Customer-side right to suspend or pause services exists. §8.2 is unilateral in Provider's favour and is platform-integrity-focused, not harm-to-Customer focused. --- ## 3. Existing Notification Obligations | Trigger | Clock | Reference | |---|---|---| | Confirmed security incident affecting Customer Data | 72 hours from confirmation | §11.1 | | Material changes to the Services | At least 15 days in advance | §11.2 | | Substitution of Upstream Provider | 30 days' written notice | §4.1 | | Addition of a sub-processor | 10 business days' notice | §17.1 | **Notable gap:** No notification obligation is triggered by AI output failures, model degradation, bias incidents, regulatory inquiries directed at the model/platform, or harmful outputs generated at scale. --- ## 4. Existing Indemnity Structure - **Provider → Customer:** Defence and indemnification against third-party IP infringement claims (US patent, copyright, trademark)

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### Step 2 output

# Section 4A — AI Suspension and Kill-Switch Obligations --- ## 4A.1 Defined Terms For purposes of this Section 4A: **"Suspension Trigger"** means any event enumerated in Section 4A.2. **"Kill-Switch Action"** means an immediate, unilateral suspension of the Services or any discrete AI output function, effected without prior consent of any other party. **"Notice-and-Consult Suspension"** means a suspension effected only after the notifying party has delivered written notice and allowed the other party a defined consultation window before suspension takes effect, except where an intervening Suspension Trigger independently requires immediate action. **"Provider Awareness"** means the earlier of: (a) actual knowledge by any officer, engineer, or operations personnel of Provider; or (b) receipt by Provider of written or electronic notice from Customer, a Regulatory Authority, or any Upstream Provider identifying a potential Suspension Trigger. The clock under this Section 4A begins running at the moment of Provider Awareness and does not reset upon internal escalation or verification. **"Regulatory Authority"** means any governmental, self-regulatory, or supervisory body with jurisdiction over Customer's provision of investment services or Provider's operation of the Services, including but not limited to the SEC, FINRA, and any applicable state securities regulator. **"Confirmed Data Exfiltration"** means a reasonably substantiated determination, including based on preliminary forensic indicators, that Customer Data or Customer client data has been accessed, copied, transmitted, or processed by or through the model inference pipeline outside the scope authorised by this Agreement. **"Safety Incident Publication"** means any public disclosure by an Upstream Provider, a government body, or

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### Step 3 output

**PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT** **To:** Deal Lead **Re:** Larkspur AI MSA — Section 4A Negotiation Posture --- **Ask (Opening Position)** Insert Section 4A as drafted. Key non-negotiable terms on opening: five enumerated Suspension Triggers including regulatory order (4A.2(c)) and Safety Incident Publication (4A.2(e)); Customer's unilateral Kill-Switch right on regulatory, data exfiltration, and model substitution triggers (4A.3.1); Provider's mandatory Kill-Switch obligation with failure constituting material breach (4A.3.2(a)); 4-hour regulatory-order notification clock with continuously running definition of Provider Awareness; and pro-rata fee credit for all non-Customer-caused suspensions (4A.7.1). --- **Likely Vendor Pushback** **1. "The 4-hour clock is operationally impossible."** Vendor will argue its incident response SLA requires internal triage before external notification. This is partially credible for complex incidents but not for a regulatory order, which is a discrete written instrument requiring no forensic analysis — reject entirely on that trigger, consider narrow concession elsewhere. **2. "Mandatory Kill-Switch failure should not be a per se material breach."** Vendor will assert that breach determination requires a cure period and that automatic materiality over-penalises good-faith operational errors. This is commercially self-serving; failure to halt a regulated financial AI on a confirmed trigger is precisely the conduct that warrants strict liability framing — hold the position. **3. "We cannot bind Upstream Providers by contract within 30 days."** Vendor will argue 4A.3.3(a) requires renegotiating upstream terms it does not control. This is credible for legacy agreements but not for renewals; push for a best-efforts obligation with a defined longstop date of 90 days,

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