Your AI Vendor Promised Results. Can You Enforce Those Promises?

During the sales presentation, the vendor's AI platform read a stack of supplier invoices, matched them to purchase orders, and flagged discrepancies in seconds. The sales team said the system handled this work with better than 95% accuracy. Your company signed a two-year subscription.

Three months later, however, your accounts payable staff are correcting roughly a third of the system’s output by hand. And when you complain, the vendor points to the contract.

Start With the Contract, Not the Demo

The first question, then, is what the written agreement actually promises. Performance specifications, a statement of work, service levels, or product documentation incorporated by reference may contain commitments the tool is not meeting. If they do, the claim may be a straightforward breach of contract.

Often, though, the contract says much less than the sales pitch did: the impressive statements were made in a meeting, a slide deck, or an email, while the agreement itself promises only access to the software “as is.”

A Demonstration May Create a Warranty, If the UCC Applies

Under Article 2 of the Uniform Commercial Code, adopted in Illinois at 810 ILCS 5/2-313, a seller’s affirmation of fact or promise about goods can become an express warranty when it is part of the basis of the bargain, and so can a sample or model. Illinois courts have also found that brochures and advertisements may create express warranties. By extension, a product demonstration could, in principle, serve a similar function.

Whether that rule reaches an AI subscription, however, is unsettled. Article 2 applies to transactions in goods, and courts have not been consistent about where software fits, particularly software delivered over the internet as a service. While some decisions have applied the UCC to software licenses, others have not. As a result, a buyer relying on a demonstration-based warranty theory should expect the vendor to argue that the UCC does not apply at all.

Fraud Claims Face Two Obstacles

If the contract and warranty theories fall short, a buyer may consider a claim that it was fraudulently induced to sign. Two problems come up quickly.

The first is puffery. Illinois law generally does not treat vague promotional claims as actionable misrepresentations. In Barbara’s Sales, Inc. v. Intel Corp. (2007), for example, the Illinois Supreme Court held that the message implied by Intel’s “Pentium 4” branding, that the processor was the best and fastest available, was non-actionable puffery under the Consumer Fraud Act. Likewise, calling a product “cutting-edge” or “best-in-class” is unlikely to support a claim. By contrast, a specific, measurable statement, such as an accuracy rate for a defined task, stands on firmer ground.

The second obstacle is the contract itself. Many software agreements state that the customer is not relying on any representation outside the written agreement. Illinois courts have enforced these non-reliance clauses to defeat fraud claims, because they prevent the buyer from proving justifiable reliance. In Schrager v. Bailey, 2012 IL App (1st) 111943, for example, the Illinois Appellate Court held that a non-reliance clause in a settlement agreement barred a fraud claim based on earlier statements.

A standard integration clause, however, is different. It states that the written agreement is the parties’ complete deal, but it does not necessarily address reliance. For that reason, the Seventh Circuit has held that an integration clause alone does not bar a fraud claim under Illinois law.

Negligent Misrepresentation Is Usually Not an Option

A buyer might also argue that the vendor carelessly overstated what its product could do. In Illinois, however, the Moorman doctrine generally bars recovery of purely economic losses through negligence-based claims. Although the doctrine has a negligent misrepresentation exception, that exception is narrow and has generally been limited to defendants in the business of supplying information for the guidance of others. Because a software vendor selling a product usually does not fit that description, this claim is rarely available.

Regulators Are Watching AI Claims, Too

Exaggerated AI marketing has also drawn government attention. In September 2024, the Federal Trade Commission launched “Operation AI Comply,” targeting companies that made deceptive claims about AI. The effort continued after the change in administration, and many of the FTC’s more recent AI cases involve claims made to other businesses rather than consumers. Although an FTC action won’t put money in a disappointed customer’s pocket, it reflects a broader expectation that AI capability claims be supported by what the technology actually does.

What to Gather Now

If an AI tool is falling short of what was promised, three steps help protect the business’s position:

• Preserving the record while it still exists: demo recordings, slide decks, proposals, RFP responses, emails, and any written performance figures the vendor provided.

• Documenting actual performance: specific numbers carry more weight than general impressions.

• Reviewing the agreement’s deadlines: notice requirements, cure periods, acceptance testing, and termination rights all matter, because a missed deadline can weaken an otherwise sound position.

The demo may have sold the product, but the paperwork usually decides the dispute.

If an AI vendor’s product isn’t living up to what was promised, we can help you evaluate the contract and your options. Contact us to discuss your matter.

This article provides general information and does not constitute legal advice. For guidance concerning a specific agreement, see our contract review and advisory services. Contractual rights and remedies depend on the agreement, relevant circumstances, and applicable law. To discuss potential representation, schedule a consultation. Submitting an inquiry does not establish an attorney-client relationship.