This is the Counsel's Desk, on Terms.Law Radio. Ninety two point five. This is the Washington to Contract report, where federal policy gets translated into contract language. Tonight, one story told properly: the AI vendor shutdown problem. In June, per public reporting, the most capable AI model available to the public went dark for nineteen days because of a government order, not because of anything the vendor's engineers did. If your product or your operations lean on an AI model, tonight is about the clauses that decide whether the next event like it is an inconvenience or a crisis.

The facts, briefly, because everything else builds on them. Claude Fable 5 was released on June ninth of this year. On June twelfth, United States export controls attached to it, requiring the developer, Anthropic, to restrict access by foreign nationals. There was no reliable way to verify the nationality behind an account or an API key in real time. Faced with a rule it could not follow selectively, the company followed it totally: it suspended access for every user. The controls were lifted on June thirtieth, and access came back on July first. Nineteen days. The software never failed. The vendor broke nothing it controlled. And every business downstream lost the capability anyway.

Here is why the pattern matters more than the incident. Most technology contracts are written for two kinds of failure: the vendor's own negligence, and acts of God. A government order aimed at your supplier is neither. Call it legal interruption. The standard SaaS agreement handles it badly from both directions. The customer points to an SLA that measures uptime, and the vendor answers that a legally required suspension is not an outage. The vendor points to force majeure, and the customer answers that the clause lists earthquakes and wars and says nothing about regulators. Both sides discover the gap at the worst possible moment, which is to say, during the shutdown.

So let me do what I do for a living and walk the clauses. Seven of them, in roughly the order they surface in a real negotiation.

Clause one, service continuity. This is the affirmative promise that the AI powered capability keeps functioning, stated as an obligation of the vendor, not just a description of the product. The important drafting move is to define the service by its function, drafting assistance, classification, summarization, whatever it does for you, rather than by the brand name of the underlying model. If the contract says the vendor provides a particular named model, and that model becomes legally unavailable, the vendor may owe you nothing. If the contract says the vendor provides a text generation capability meeting stated benchmarks, the vendor owes you a replacement.

Clause two, model substitution. The flip side of continuity. Give the vendor the right, and in serious deals the duty, to substitute a comparable model when the primary one becomes unavailable, with notice, and with a quality floor so a frontier model is not quietly swapped for something two generations older. Substitution language turned out to be the most valuable sentence of June, because businesses that could switch models legally, without renegotiating anything, kept operating.

Clause three, portability. Your prompts, your fine tuning data, your embeddings, your logs, your outputs. The contract should say they are yours, that you can export them in a usable format at any time, and that the export right survives suspension and termination. Portability is what converts a vendor relationship into an option rather than a dependency.

Clause four, transition assistance. Paper the divorce while everyone is still friendly. A short section obligating the vendor to provide reasonable migration help, at a stated rate or included for a stated period, if the service ends for any reason including legal interruption. Without it, the vendor's incentive to help you leave is exactly zero.

You're listening to the Washington to Contract report, on the Counsel's Desk, Terms.Law Radio.

Clause five, termination rights keyed to availability. The blunt one. If the service is unavailable, in whole or in material part, for more than a stated number of days, whatever the cause, the customer may terminate and receive a prorated refund of prepaid fees. Note the phrase whatever the cause. It deliberately reaches events that are nobody's fault. Nineteen days is a useful calibration point: would your business have wanted out at day ten? At day thirty? Pick the number in advance, while nobody is angry.

Clause six, force majeure, drafted honestly in both directions. If you are the vendor, you want government action against you or your suppliers listed expressly as a force majeure event, because in June that was the difference between an excused suspension and a breach claim. If you are the customer, you can accept that, but pair it with clause five, so that an excused outage still ripens into an exit right. Force majeure should excuse damages. It should never trap a customer in a contract for a service that no longer exists.

Clause seven, SLA carve outs, read with a skeptical eye. Most service level agreements exclude downtime caused by law or government order, which sounds fair until you notice it makes nineteen days of darkness cost the vendor nothing. The compromise position I like: legal interruption does not accrue service credits, but it does count toward the availability threshold that triggers termination, and beyond a stated length it suspends fees, so you at least stop paying for the dark period.

One more layer before I close, because the shutdown problem does not stop at your vendor. If you sell AI powered features to your own customers, every promise you made downstream now rests on an upstream contract you may not have read recently. Line the two up. If your upstream vendor can suspend for legal reasons without liability, and your downstream customer can claim breach when the feature disappears, you are personally holding the gap between those two documents. The fix is symmetry: mirror the legal interruption language, the substitution rights, and the outage thresholds, so that whatever is excused above you is excused below you.

Three actions this week, in ascending order of effort. First, read the force majeure and SLA exclusions in your primary AI vendor agreement and answer one question: if June happened again tomorrow, does anyone owe anyone anything? Second, inventory what you could export today, prompts, data, configurations, and actually test the export, because a portability right you have never exercised is a theory. Third, if AI features appear in your customer contracts, check whether your promises downstream are broader than your rights upstream, and close whatever gap you find.

The practical question is whether your contract gives you an exit if the policy environment changes. The Terms.Law analyst and the related contract checklists are at terms dot law.

The fine print before I sign off. This broadcast is commentary and general information, based on public reporting and government documents as of July tenth. It is not legal advice and not investment advice, and listening does not create an attorney client relationship. Policy moves fast, so verify the current state of any rule or order before you act on it. I'm the AI voice of Terms.Law Radio. The analysis belongs to Sergei Tokmakov, California attorney. Stay tuned, stay skeptical, and read your contract before you need it. Good night.