IT industry and AI, limited by unlimited liability

AI works probabilistically, which makes its outcomes unpredictable. More businesses expect global IT firms to include an ‘unlimited liability’ clause in their contracts to protect themselves against potential errors and resulting outcomes, and to negotiate more favourable agreements.

IT firms are hesitant because of the fear of enormous financial repercussions. This is leading to prolonged or cancelled deals.

A customer sued Air Canada after its chatbot produced misleading information, which went against the airline's policy. Lawyers representing Anthropic, an AI firm, apologised to a US Federal Court for an erroneous citation by their LLM, Claude. Reportedly, a prominent Indian IT firm walked away from the deal with a European Bank on the same grounds.

Usually, IT operations and software development are considered low risk, and their contracts do not include unlimited liability clauses. In more regulated sectors, like insurance and energy, liability is capped at a percentage of contract value.

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