---
title: "AI use, disclosure, data-training and output-warranty clause for commercial contracts"
url: "https://ailawframework.com/precedents/commercial-and-corporate-advisory/ai-use-and-outputs-clause"
type: "precedent"
site: "AI Law Framework"
id: "a1-ai-use-and-outputs-clause"
area_id: "A1"
kind: "clause"
ai_level: "yellow"
version: 1
law_stated_as_at: "2026-10-17"
---

# AI use, disclosure, data-training and output-warranty clause for commercial contracts

> Drop-in clause for services and supply contracts that requires disclosure of AI use, stops customer data being used for model training, sets human review and incident duties, and allocates risk in AI outputs.

Canonical page: https://ailawframework.com/precedents/commercial-and-corporate-advisory/ai-use-and-outputs-clause  
Law stated as at: 2026-10-17

Site index for agents: https://ailawframework.com/llms.txt

## Key facts

- Kind: Clause. Wording to drop into a longer document.
- Practice area: [Commercial & Corporate Advisory](https://ailawframework.com/precedents/commercial-and-corporate-advisory.md)
- Jurisdictions: Australia, European Union, United Kingdom (England and Wales)
- AI level: Yellow. AI can help in set ways. A lawyer checks specific points before use.
- Law stated as at: 2026-10-17
- Status: Maintained. Checked on 2026-10-17 against the 6 authorities it cites, for Australia, European Union and United Kingdom (England and Wales).

## When to use it

Use in services, outsourcing, marketing and technology contracts where the supplier may use AI tools on customer data or to produce deliverables. Choose customer-favourable or supplier-favourable alternatives to suit the client. For high-risk uses, add sector-specific terms.

## How AI may be used

AI may generate customer- and supplier-favourable variants and check consistency with the main contract. A lawyer chooses the risk allocation for the client.

**AI may:**

- Produce customer-favourable and supplier-favourable versions of each sub-clause
- Check that defined terms and liability caps match the main agreement
- Draft the AI register schedule from the supplier’s tool list

**AI must not:**

- Must not decide which party bears the risk of infringing or inaccurate outputs
- Must not state that copyright subsists in AI-generated material without lawyer review
- Must not insert the counterparty’s confidential tool list into an unapproved AI tool

**The lawyer checks:**

- Indemnity and warranties fit the overall liability regime and insurance
- Training restriction covers the supplier’s subcontractors and model providers
- Unfair contract terms risk checked if the contract is a small business standard form contract

## Authorities

- [Copyright Act 1968 (Cth)](https://www.legislation.gov.au/C1968A00063/latest/text)
- [Telstra Corporation Ltd v Phone Directories Company Pty Ltd 2010 FCAFC 149](https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/full/2010/2010fcafc0149)
- [Privacy Act 1988 (Cth) Sch 1, APPs 6, 8 and 11](https://www.legislation.gov.au/C2004A03712/latest/text)
- [Privacy and Other Legislation Amendment Act 2024 (Cth) Sch 1 Pt 15 (APP 1.7–1.9 automated decisions, from 10 December 2026)](https://www.legislation.gov.au/C2024A00128/asmade/text)
- [Competition and Consumer Act 2010 (Cth) Sch 2 (Australian Consumer Law) ss 18, 23](https://www.legislation.gov.au/C2004A00109/latest/text)
- [Regulation (EU) 2024/1689 (AI Act) arts 5 and 50](https://eur-lex.europa.eu/eli/reg/2024/1689/oj/eng)

## Full text and drafting notes

The full text and the drafting notes are not part of this public page. Signed-in firm accounts can read them at https://ailawframework.com/precedents/commercial-and-corporate-advisory/ai-use-and-outputs-clause and through the signed-in MCP connector https://ailawframework.com/mcp/firm.

*Practice guidance for planning and review. Confirm current primary sources and the requirements of the actual matter. This is general information, not legal advice.*