Transparency with AI: Why Your Service Contract Needs A Clear AI Clause

Why Every Business Using AI Should Update Their Service Contracts

Artificial Intelligence (AI) has drastically changed the way professional services are delivered and the adoption of AI tools is now seen as a necessity in order to ensure that your business not only survives but thrives.

However, despite the growing use of AI, there is no singular piece of legislation that governs its use in relation to the provision of professional services. While there is legislation in place relating to privacy and copyright laws that may impact your use of AI, there is no specific legislation in place that requires you to disclose your use of AI in service contracts.

Despite the lack of legislation in this area, there is growing consensus that for the sake of transparency and to avoid any future legal risks, liability or damage to client relationships, it is essential to disclose your use of AI in a service contract.

This article explores why these clauses are necessary and what they should include.

Why do I need to include AI clauses?

There are several reasons as to why you should disclose your use of AI in a service contract when you provide professional services. These reasons incorporate not only legal but also commercial considerations:

1. Growing regulation and concern: While there is currently no legislation in place, with the growing use of AI, there is likely to be regulation for the use of AI and when use needs to be disclosed in the near future;
2. Contract Ambiguity: There are several legal considerations that arise with the use of AI and disclosing this in your service contract from the outset means that you can adequately allocate responsibility and liability within the service contract in relation to matters such as intellectual property, data usage, privacy rights and service quality;
3. Customer Relations: Failing to disclose your use of AI could damage client relationships as a result of the following:
   • Clients expect honesty about how the work they have engaged you for is being completed;
   • Clients may have expectations regarding the judgement and skill being applied to the work they have engaged you for;
   • Clients may be concerned about how their information is handled when provided to AI tools;
   • Businesses or clients may not want AI used in the deliverables they provide;
   • Clients may question the fees payable on the basis that the work required less time or expertise where AI tools are used; and
   • Clients may doubt the quality and reliability of AI-generated work.

While you may not be legally required to disclose your use of AI tools, it is widely considered best practice to do so.

What clauses should you include?

If you use AI tools when providing services, even if this only forms a component of your work, you should disclose this in your services contract. Disclosing this from the outset ensures that your client is fully aware of what tools are being used and can reduce any disputes regarding the work conducted or provided.

Depending on how you use AI tools and the extent of your use, the following clauses should be included in your service contract:

1. General Disclosure: You should have a clause disclosing the AI tools you use and how they are used in relation to the services;
2. Limitations: This clause should note that AI generated content or output may be subject to error, bias or limitations and you do not guarantee the accuracy or reliability of any content or output;
3. Intellectual Property: You should include a clause allocating ownership (if any) of any content or output created by AI;
4. Data Use and Protection: As AI tools often require data to be inputted in order to generate content, your service contract (in conjunction with a privacy policy) should outline what data will be used with the AI tool, how it is stored and how it will be protected. You should also note whether an AI tool will store this information to train its system;
5. Human Oversight: It is best practice to ensure that any AI content or output is reviewed or approved by a qualified staff member. You should make note of this in your service contract; and/or
6. Update to Tools: Given that AI tools are constantly evolving, provisions should be included to state that you are not contractually locked in to use any particular tool or model. However, when liaising with clients directly, you should be transparent about exactly what tools you are using.

Conclusion

As AI becomes an essential component of delivering professional services, proactively addressing your use of AI tools in service contracts is no longer optional, but best practice.

By including clear AI use clauses, you can manage expectations, safeguard confidential information, reinforce the value of your human expertise and reduce your legal risk.

In being transparent and upfront about your use of AI tools, you can avoid misunderstandings or disputes with clients and position yourself as a responsible, ethical and future-focused user of AI tools.

Contracts Dispute Resolution & Litigation LawBase Newsletter Regulatory and Compliance Small Business Startups

AI Can’t Replace Your Lawyer: How LawBase Uses AI

In this article, we explore how LawBase uses AI to streamline legal processes while highlighting why technology can never replace the wisdom, judgement, and personal guidance clients receive from experienced legal professionals.

Read more

Contracts

Relying on ChatGPT For Contracts: A Risky Legal Move

This article will explore the risks involved with having ChatGPT create contracts for you and why using a lawyer should be the preferred method.

Read more