What Should an Offshore AI Developer Contract Include? UK & EU Checklist

An offshore AI developer contract should define who supplies and manages the developer, what will be delivered, how work is accepted, what you pay, who owns the assets and how data and access are controlled. It should also cover maintenance, liability, termination and technical handover. For AI work, name the prompts, retrieval pipelines, evaluation datasets, model configurations and approved tools alongside the source code.

Use this checklist to prepare a master agreement, statement of work and, where relevant, data-processing and transfer schedules. Agree which document takes priority if terms conflict. Have advisers in the relevant jurisdictions adapt the documents before you grant access to customer records or production systems.

The essential offshore AI developer contract checklist

Define the parties and the real operating model

State whether you are buying dedicated staff capacity, engaging an individual contractor or commissioning a development service with agreed outputs. Identify who employs or pays the developer, directs daily work, supplies equipment and enforces confidentiality and security obligations. A staffing agreement does not by itself promise completion of a fixed project.

If you engage a contractor through their own intermediary, check whether the UK off-payroll rules apply and who must assess status. Responsibilities differ by client circumstances, including size; see HMRC's IR35 guidance. Ask your adviser to assess the actual cross-border arrangement rather than assuming that every offshore engagement has the same treatment.

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Turn the AI brief into measurable deliverables

Avoid a scope such as “build an AI assistant”. Name the use case, users, approved source systems, deployment environment and human-approval points. Record who supplies API access, representative data, subject-matter review and security approval. Include exclusions, such as making payments or changing customer records without authorisation.

Set the scoring method and pass criteria before development begins. Keep a versioned evaluation set, record the model and configuration tested, and separate failures that block release from improvements for later work. Agree who reviews results, the review period, the correction and retest process, and what happens if acceptance is disputed. For staffing, distinguish these delivery controls from the monthly fee obligation.

A useful acceptance exercise is to remove a source document, revoke a test user's permission and simulate a model-provider outage. Ask the developer to demonstrate the resulting answers, access restrictions, alerts and recovery. This is an illustrative test brief: adapt it to the system's risks and use synthetic records.

Agree ownership and usable rights in every AI asset

Have counsel draft an assignment covering the supplier's rights in newly created deliverables, with a clear transfer point: creation, payment or acceptance. Avoid contradictory clauses using different triggers. If rights pass on payment, agree what use is permitted while an invoice is pending and how disputed amounts affect access.

List source code, generated code, prompts, agent definitions, tool schemas, retrieval configurations, embeddings, evaluation sets, documentation and deployment pipelines. Include fine-tuned weights or adapters where they are part of the work and can be transferred. Require disclosure of assets the supplier cannot assign; do not assume a broad ownership clause gives you rights in a third-party model or dataset.

Schedule the developer's pre-existing tools and agree a durable licence sufficient to operate, modify and migrate approved components. Require a dependency inventory with versions, sources and licences, plus approval before introducing restrictive terms. The guide to offshore AI developer code ownership explains the distinction between new work and background material.

Prohibit unauthorised training and reuse

Specify which coding assistants and model-provider accounts may receive client material, what may be submitted, and the approved retention and training settings. Prohibit unapproved reuse for model training, demonstrations or other clients. Require approval before changing providers or data-use settings. Apply these obligations through the supplier's agreements with personnel and relevant subcontractors; your contract alone does not change an external provider's terms.

Document UK GDPR and EU GDPR data transfers

Remote access by a separate Philippine supplier can be a restricted transfer even when records stay on UK servers. Access by your own employee within the same legal entity is treated differently under UK transfer rules, although security duties remain. Map the entities and access routes using the ICO's international-transfer guidance.

Where appropriate safeguards are needed for a UK restricted transfer, assess the UK International Data Transfer Agreement or UK Addendum and the associated transfer risk assessment, now called a data protection test in legislation. These are covered in the ICO guidance. For EU/EEA transfers, assess whether the Commission's Standard Contractual Clauses fit the parties and processing. Have the appropriate module, transfer assessment and supplementary measures reviewed; signing clauses alone is not the whole assessment.

• The data categories, people concerned, purposes, duration and documented processing instructions.
• Approved systems and subprocessors, processing locations, authorisation arrangements and change notices.
• Security controls, permitted downloads, incident notification and assistance with investigations.
• Assistance with individual rights requests, impact assessments and audits.
• Return or deletion requirements, including retained backups and any justified retention exceptions.

Allocate AI governance responsibilities

Name the person responsible for use-case classification, data provenance, technical documentation, human oversight and monitoring. Where relevant, have counsel identify the provider and deployer roles under the EU AI Act. Describe the work each party must perform instead of relying on a general promise to “make the product compliant”.

The European Commission lists recruitment tools such as CV-sorting among high-risk uses and identifies requirements concerning dataset quality, documentation, oversight, robustness and security. Check classification and applicable dates against its AI Act guidance. Allocate responsibility for reassessment when a system's purpose or functionality changes.

Control repositories, credentials and production access

• Use client-controlled repositories, cloud subscriptions, model accounts and databases wherever practical.
• Grant named, least-privilege access with multi-factor authentication; prohibit shared credentials.
• Separate development, testing and production, using synthetic or appropriately protected test data.
• Store secrets in an approved vault, outside source code, prompts and workflow exports.
• Name who approves deployments, database changes and model substitutions.
• Set incident contacts, notification deadlines, containment responsibilities and evidence-preservation steps.

Align the Philippine employment arrangements

Name the local employing entity and require confidentiality, intellectual-property, privacy and security obligations consistent with the client agreement. Confirm whether substitution or subcontracting is permitted, who manages local employment issues and what happens when the developer leaves. Ask counsel to check that the necessary rights pass through each agreement.

The Philippines does not change its clocks for daylight saving, so the developer works a local shift that overlaps your UK or European business hours. Record availability, adjustments when your clocks change, public holidays, planned absence and escalation cover. The offshore developer management plan can help turn these terms into working routines.

State the complete client fee and payment model

Distinguish the staffing fee from model, cloud, database and software-licence charges. State invoice currency, tax treatment, payment terms, fee-review rules, approved expenses and responsibility for usage overruns. List inclusions explicitly; do not assume equipment, out-of-hours support or transition work is covered.

Record how absence, replacement, notice and early termination affect billing. Where replacement or refund terms are offered, put the eligibility, process and calculation into the signed agreement. A replacement provision should also explain how access, documentation and unfinished work pass to the incoming developer.

Plan maintenance, model changes and failure handling

A production AI system needs an owner after acceptance. Assign monitoring of failed requests, retrieval quality, latency, expenditure and security events. Define support hours, severity levels, response expectations and escalation. Distinguish response targets from resolution commitments and specify how third-party outages are handled.

Use written change control for new integrations, expanded data access and revised evaluation targets. Record the impact on scope, fees, security, privacy and acceptance evidence. Require regression checks after changes to models, prompts, retrieval logic or source data, with rollback or suspension available when agreed release criteria fail.

Cover liability, termination and a usable handover

Have counsel align warranties, indemnities, insurance and liability caps with the project's risks. Address authority to assign deliverables, approved licences, confidentiality, data protection and third-party claims. Agree notice periods, breach-remedy procedures, suspension rights and obligations that survive termination. For the wider engagement choice, see the Philippines legal hiring guide.

Require current code, workflow exports, prompts, evaluation materials, architecture diagrams, deployment instructions, dependency inventories and an open-work register. Define transition assistance, its price and availability. Transfer eligible accounts, rotate secrets, revoke departing users' access and obtain return or deletion confirmation covering agreed systems and backups.

Final pre-access review

• Can another maintainer identify and use every required asset, account and dependency?
• Are acceptance criteria, reviewers, correction procedures and payment consequences explicit?
• Do ownership and licence terms cover what the client needs to operate and change?
• Do the data map and transfer arrangements reflect the actual entities and overseas access?
• Are employer, supplier and developer obligations consistent?
• Are operational costs, incidents, support and exit assigned to named owners?