Is a Contract with a Computer Program Enforceable?

Contracting with artificial intelligence

By Benjy Schirm, J.D. | Reviewed by Canaan Suitt, J.D. | Last updated on August 23, 2023

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The common fears around giving AI power are rooted in visions of HAL and Skynet—computers that are given full autonomy end up subverting the humans that created them.

Taking this to the real world, Google Translate is a handy modern feature that translates between a multitude of languages using AI technology. It was coded by engineers to translate in the most efficient manner, and the software program wrote its own language to do so—a language no one knows or can fully explain.

In a movie, this is where a dramatic noise would be inserted.

Applying Contract Law to Agreements Between Humans and Machines

These days, humans enter into agreements with website programs every day—especially when goods are bought and sold online. But the legal question is: Are these contracts valid when they aren’t between two people, but a person and a machine?

One of the basic definitions of contract law is that there is an agreement between two or more parties (legal entities). Traditionally, this was two people who agreed on the terms of the agreement and the consideration or payment for various goods or services that will be rendered by the party to the contract.

In the event of a breach of contract, one contracting party could take action through the legal system to enforce the agreement.

Questioning the Legal Status of AI

Google’s new assistant features include the ability to have a computer program schedule appointments for you—even if those appointments are dinner reservations with a non-refundable reservation fee. So, in essence, this is artificial intelligence forming contracts with businesses.

By the letter of the governing law, contracts may be made between parties through intermediaries or agents.

Frequently, contracts are made for businesses through agents that have been given the authority to act on the business’s or principal’s behalf. In many ways, our ability to contract is based on our legal status and who holds the authority to act on that status.

As of now, the Pennsylvania Legislature hasn’t passed any state laws controlling contracts with AI, but the common laws of contract in the state control where the legislature is silent.

Can Computers Act as Agents For a Business?

The definition of an agent acting on behalf of a principal is that they have defined boundaries to their authority.

Through one set of eyes, computers are simply machines that allow us to do things we tell them faster and more efficiently and, given the proper guidance, can make our lives so much easier.

Through another lens, they create more grey areas and complications.

Have a Legal Strategy in Place

No matter where you sit, you will probably make a binding contract with a computer at some point.

If you are entering into agreements without knowing the entity on the other end of the transaction, you are putting yourself at risk. If your company is utilizing new technology for efficiency, be certain that you have all of your policies labeling out the authority and limitations given to these programs to protect your future.

If you have questions or concerns about business transactions involving technology, smart contract formation, or software license agreements, consider contacting an experienced and reputable contracts attorney for legal advice and guidance along the way.

If you’d like more general information about this area of the law, see our overviews of contract law and technology transactions.

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