AI clauses in customer terms and conditions

A business that uses AI in what it delivers to customers (an automated assessment, a generated report, a chatbot, a recommendation, a feature in its product) needs its customer terms to say so, to set what the outputs are and are not, to limit liability in a way the law will enforce for consumers and business customers respectively, to deal with the customer's inputs, and to keep the right to change or withdraw the feature. The AI provisions for the agreement are drafted or reviewed for a fixed £595 and delivery in five working days.

Who this is for

Businesses in England and Wales selling services or products that involve AI to consumers or to other businesses, from an online service with an automated feature to a professional firm using tools in its deliverables.

What matters in AI clauses for customer terms

Telling customers that AI is used and where

The terms state that the business uses AI tools in delivering the service, which parts of the service involve automated processing or generated content, whether outputs are reviewed by a person before the customer relies on them, and how the customer can reach a person, because the consumer protection rules in the Digital Markets, Competition and Consumers Act 2024 treat the omission of material information as an unfair practice, the UK GDPR requires transparency where personal data is processed, and a customer who learns from a news story that the report they paid for was generated has a complaint the terms should have prevented.

The limits on what AI outputs are and what they are not

The terms state what an output is (information, a draft, a recommendation, an estimate, a starting point) and what it is not (advice, a guarantee, a decision the business has taken, a substitute for professional judgement where the service is not professional advice), state that outputs may contain errors and should be checked before reliance, and require the customer to use them within the stated purpose; the statements are drafted to be true and specific rather than a blanket disclaimer, because a disclaimer that contradicts how the service is marketed is a misrepresentation and, for consumers, a term the court will not enforce.

Consumer customers and the terms the law will not enforce

For consumers the Consumer Rights Act 2015 requires services to be performed with reasonable care and skill (section 49) and digital content to be of satisfactory quality and fit for purpose (sections 34 and 35), prohibits excluding those rights, and treats unfair terms as not binding, so that a clause excluding all liability for AI outputs is unenforceable and a clause that purports to make the consumer responsible for checking everything is suspect; the clauses instead describe the service accurately (including what the AI does), limit liability to the extent the Act permits, exclude only what can lawfully be excluded, and give the consumer the remedies the Act provides, which is the position that survives a complaint to the Competition and Markets Authority or Trading Standards.

Business customers, caps and the AI carve-out that is not a carve-out

For business customers the Unfair Contract Terms Act 1977 applies the reasonableness test to exclusions in standard terms, so that a total exclusion of liability for AI outputs may fail while a cap and a defined scope will hold; the clauses bring AI outputs within the general cap, exclude indirect loss, state the customer's responsibility for its use of outputs and for its inputs, provide the warranty the business can give (the service as described, with reasonable care and skill in its operation) rather than a warranty of the outputs' accuracy, and state that the business does not warrant results the customer obtains from outputs it has altered or combined; a decision about a person made solely by an AI tool with legal or similarly significant effects is governed by Article 22 of the UK GDPR as amended by the Data (Use and Access) Act 2025, which permits it outside special category data only with safeguards (information, representations, human intervention, the right to contest), and the terms should say where the business's service makes such decisions.

Data, the customer's inputs and the licence the business needs

The customer's inputs (documents, data, prompts, images) are the customer's, the business needs a licence to process them to provide the service, the terms should say whether the business uses inputs to improve its models (only with the customer's agreement in terms that say so, never under a general 'service improvement' clause), should require the customer to have the rights and the lawful basis for the inputs it supplies (with an indemnity for breach), and should refer to the privacy notice and the data processing agreement where personal data is involved; the UK GDPR treats personal data entered into an AI tool as processing, requiring a lawful basis, a notice to the people concerned, a data processing agreement with the provider under Article 28 and an impact assessment under Article 35 where the use affects individuals, and the business's own providers are its sub-processors.

Changes, discontinuation and the feature that goes away

The terms reserve the business's right to change the models and providers behind the service, to modify AI features, to suspend them for misuse or for a provider's failure, and to discontinue them on notice with a refund or a substitute where a paying customer loses something material, within the limits the consumer protection rules place on unilateral variation (notice, a right to cancel, no change to the essential characteristics without agreement); the terms also contain the acceptable use clause for AI features (no unlawful, harmful or prohibited uses, no attempts to extract the models or their training data, no use to build a competing product) and the business's AI use policy, drafted separately, governs what its staff do with the tools.

What it costs

AI provisions in a contract, £595. Review or draft AI-specific terms in a supply or customer agreement. Five working days.

AI use policy, £995. Internal policy plus the accompanying contract provisions. Five working days.

Email me at geoffrey@caesar.co.uk with what you need and any documents, and I will confirm the scope and the fee in writing, usually the same working day.

What you get

• An internal AI use policy your staff will follow, rather than a document that bans everything and is quietly ignored
• Contract provisions covering output ownership, training data, confidentiality and liability
• A defensible position to give customers who ask what your AI governance looks like
• Review of your AI suppliers' terms, including what they reserve the right to change
• Practical guidance on what to permit, what to restrict and what to prohibit outright
• One round of amendments

What is not included

• Technical AI assurance, model testing or bias auditing
• Sector-specific regulatory approval
• Advice on non-UK regulatory regimes beyond flagging where they apply
• Ongoing regulatory monitoring

Questions I am often asked

Can we exclude all liability for what our AI feature produces?

Not for consumers, where the Consumer Rights Act prohibits it, and probably not for business customers, where a total exclusion fails the reasonableness test. The clauses describe the service accurately, bring outputs within the cap and exclude what can lawfully be excluded.

Do we have to tell customers which parts of the service use AI?

Yes: omitting material information is an unfair practice under the 2024 Act, and the UK GDPR requires transparency where personal data is processed. The terms say where AI is used, whether a person reviews outputs and how to reach one.

Can we use customers' inputs to improve our models?

Only with the customer's agreement in terms that say so. A general 'service improvement' clause is not that, and the customer must have the rights and the lawful basis for what it supplies, which the terms require.

Related guidance and services

• AI contracts and AI use policies, £595, the service this page describes
• SaaS and technology contracts, £995
• Data protection agreements and privacy terms, £795
• AI features addendum to SaaS terms
• Chatbot terms for a website

This page is general guidance for businesses in England and Wales, not advice on your own circumstances. Last reviewed: October 2026. Email geoffrey@caesar.co.uk.