Artificial Intelligence And Contracts: Shaping Standards

With this article, we will address some legal issues arising from contracts featuring AI-based services/products.

So far, commentators on contracts and AI have mainly focused on the data protection and cybersecurity aspects (including, for instance, security measures, privacy-by-design / default, review of decisions based on automatic processing, data portability, etc.)

With this post, we will address some additional aspects to be taken into account when considering AI-based contractual arrangements:

Applicable law. A first element is the choice of the applicable law. Any party generally prefers to apply the laws of its own jurisdiction to any agreement it enters into, in order to avoid unknown implied terms. When dealing with AI, this has become an even more crucial element, considering that currently EU (and member states') laws do not provide for a specific legal framework for AI (and robotics), with wider room forunknown and impliedterms to creep into the contract. Just consider, for example, a contractual arrangement for the supply of a robot employed in industry manufacturing and related services. Under Italian law, such arrangement may involve the (cumulative?) application of the Italian civil code provisions related to the following types of contracts: Sale and purchase (vendita) Lease agreement (locazione), for the license of IPRs Service agreement (appalto di servizi or prestazione d'opera, depending on the nature of the relevant obligations) According to the Italian Civil Code, provisions dealing with each of the above contracts imply different approaches on many important topics, including (a) warranties/fitness for a particular purpose; (b) liability; and (c) passing of risk to the purchaser. In light of the above, we recommend carefully choosing a familiar applicable law, also taking utmost care in defining contractual scope of activities, i.e. the actual obligations borne by the parties. Insurance and SLAs.AI liability is a widely debated topic ( see here). Under "traditional" outsourcing contractual arrangements, SLAs (and the related obligation to pay a penalty) are generally devised to avoid 'low grade' issues that might arise, for instance, if processes are not followed properly. This applies to human beings who are by definition fallible and more or less efficient depending upon a large number of factors. AI based services are mainly performed through automatic means (meaning human intervention is very limited) with a...