AI in Construction Contracts: What You Need to Know Without the Legal Jargon

Most standard building contracts weren’t written with AI in mind. That means if something goes wrong, the contract might not clearly say who’s responsible. This can lead to confusion, legal disputes, and unexpected costs. This guide breaks down what you need to watch out for.

So, what is AI, really?

AI is software that does tasks we usually expect people to do, such as learning, spotting patterns, and making decisions. In construction, AI might help with:

• Creating designs
• Finding clashes in drawings
• Scheduling and predicting delays
• Tracking safety issues in real time
• Running machinery like diggers and graders
• Reviewing and even drafting contracts

But not all AI tools are the same. Some are just regular software dressed up with a fancy label. Others are much more advanced and can “learn” over time. Either way, if AI is being used, it needs to be clearly explained in the contract so that all parties understand the specific software being used and its scope and limitations.

Big legal questions that arise with AI

When AI gets involved in a project, there are some serious questions you need to think about, especially around who’s on the hook if something goes wrong.

1. AI can get it wrong

Some AI tools can “hallucinate”. This means they can spit out completely wrong information. Like telling someone to install something in the wrong place or drawing up an incorrect plan. If that causes damage or delay, who pays for it?

AI may not capture real-time legal updates. Can we be sure that the AI aligns with the correct jurisdiction’s laws and formalities? In the absence of this, AI could lead to non-compliant designs or proposals or unenforceable clauses.

2. Who’s checking the AI’s work?

If an architect signs off on a design that AI helped create, and it turns out to have a hidden problem, are they still responsible? How much checking was it possible and reasonable for them to do? That’s something the contract needs to spell out.

3. Is the AI playing fair?

If the AI was trained using biased or old data, it could make poor choices, like suggesting the wrong materials or missing red flags in a schedule.

4. Who's using the AI and are they trained?

If someone’s using AI tools on your project, you’ll want to know they actually know what they’re doing. The contract should say who’s allowed to use the tech, and what training they need.

5. Who owns the intellectual property in the AI produced product?

AI-generated designs raise intellectual property questions, as AI learns from existing works, blurring the line between original and borrowed content. Since AI can't own intellectual property, rights may belong to the user, developer, original data creators, or third parties, making ownership and potential infringement unclear.

6. Signed, Sealed… and Shared? Data use in AI-Powered contracts.

Data protection is key in construction contracts, especially when AI is involved. If contract data is used to train AI, have parties given consent? Are there clear processes to meet privacy laws? Contracts must spell out how data is handled and shared, or risk breaching data regulations.

Will insurance cover an AI mistake?

Here’s the tricky part: traditional insurance policies might not cover AI-related errors. That means if a delay or defect happens because of AI, someone might be left holding the bag. The contract should say:

• Who takes the fall if the AI messes up
• What kind of insurance coverage is needed and whether any extensions to it are needed
• If the software company that made the AI can be held responsible, who should pursue them

What happens if there’s a dispute?

If things go south and there’s a legal dispute over AI, it might get complicated fast. There could be questions like:

• Was the AI trained properly and updated?
• Did someone use it wrongly?
• Can you sue the AI developer if the software caused the issue?

On the plus side, AI often tracks everything, such as video, audio, temperature, and other job site data that could help prove exactly what happened if there's ever a dispute.

What to put in the contract if AI is involved

If AI tools are going to be used on your project, don’t leave things to chance. Your contract should cover:

What AI is being used (AI Tool Definition and Scope)

• Name the tools and systems being used
• Say whether the contractor chose them or if the owner required them

Who can use the AI (Authorised Use and Training)

• List who’s allowed to use AI tools
• Require proper training and supervision

Who’s responsible if AI makes a mistake (Allocation of Risk)

• Spell out who’s liable if something goes wrong
• Allocate responsibility if AI tools fail to perform as expected

Insurance and legal back-up (Insurance and Indemnity)

• Confirm that insurance policies cover AI issues
• Make sure one party can’t shift blame unfairly

Who owns the data (Ownership and Access)

• Decide who keeps the AI-generated data after the job ends
• Make sure data is stored and usable for future maintenance or repairs

Don’t forget about the future

Even after a project is done, AI-generated information such as building models or logs might be needed years later. The contract should:

• Guarantee access to that information down the line
• Make sure the AI software stays usable
• Allow for future updates if needed

Final thoughts: Don’t get burned by AI surprises

AI can be a huge asset on construction projects, but only if your contracts are ready for it. If you don’t address the risks upfront, you could be facing costly delays, legal headaches, or coverage gaps.

Here’s how to stay safe:

• Talk to a construction lawyer early if AI is part of your project
• Update your contracts to handle AI tools properly
• Check that your insurance covers AI-related risks
• Stay in the loop as laws and standards change

With the right planning, AI can work for you—not against you.

If you would like further information on how AI can assist with your construction projects, contact us on 020 8290 0440 or email Sibel on sibel.vurdu@thackraywilliams.com.