The Algorithmic Age: Navigating AI's Impact on Commercial Law

Artificial intelligence is no longer science fiction; it's a fundamental part of the modern business toolkit. From automating client communications and analysing contracts to making hiring decisions and setting prices, AI is driving unprecedented efficiency and innovation. But as we integrate these powerful tools deeper into our operations, we venture into a new and complex legal and ethical landscape.
For businesses in Australia, harnessing the power of AI means looking beyond the technological benefits and confronting the critical legal questions it raises. Are you prepared for the risks?
Key Legal Battlegrounds for AI in Business
The introduction of AI challenges long-standing legal principles. Our current laws were written for human actors, and applying them to autonomous, learning systems creates significant gray areas.
Contracts and Liability: Who's Responsible When the AI Gets It Wrong?
Imagine an AI system, tasked with procurement, negotiates and executes a contract for faulty goods. Who is liable for the breach? The business that deployed the AI? The AI's developer? The issue strikes at the heart of contract law, which is built on human concepts like intent and capacity.
Furthermore, the "black box" problem—where an AI's decision-making process is too complex for even its creators to fully understand—makes it incredibly difficult to determine fault when something goes wrong. If an AI-driven financial advisor gives negligent advice, proving the 'how' and 'why' becomes a major legal hurdle.
Intellectual Property: Can an AI Be an Inventor?
Generative AI can now create art, write code, and even design new products. This raises a fundamental IP question: who owns AI-generated work?
Under current Australian law, copyright and patent ownership are tied to human authorship or invention. A landmark Federal Court case (Thaler v Commissioner of Patents) confirmed that an AI cannot be named as an "inventor" on a patent application. This means businesses must have clear policies on how AI is used in the creative and inventive process to ensure they can protect the resulting intellectual property.
Data Privacy: The Fuel for the AI Engine
AI systems are fuelled by data—often, vast amounts of it. This directly engages your responsibilities under Australia’s Privacy Act 1988. Businesses must consider:
- Lawful Collection: Are you transparently informing individuals that their personal information will be used to train or be processed by AI systems?
- Data Security: How are you protecting the massive datasets used by your AI from cyber threats and breaches?
- Automated Decisions: If your AI makes a significant decision about an individual (e.g., approves or denies a credit application), can you explain the basis of that decision as required by privacy principles?
The Ethical Tightrope: Beyond Legal Compliance
Staying on the right side of the law is just the starting point. The ethical implications of AI usage can carry enormous reputational risk and impact your social license to operate.
Bias and Discrimination
An AI is only as good as the data it's trained on. If historical data reflects societal biases (e.g., hiring practices that favoured one demographic over another), the AI will learn and perpetuate those biases, often at scale. Using a biased AI for recruitment or performance management could lead to discriminatory outcomes that are not only unethical but also a breach of anti-discrimination laws.
Transparency and Explainability
When a customer is denied a loan or a candidate is rejected for a job by an AI, they deserve to know why. Businesses have an ethical obligation to strive for "explainable AI." A lack of transparency can erode trust with customers, employees, and the public, leading to a perception that your business uses arbitrary or unfair automated processes.
Accountability and Human Oversight
Ultimately, an AI is a tool. A business cannot delegate its corporate responsibility to an algorithm. It's crucial to establish clear governance frameworks that define who is accountable for the AI's deployment and outcomes. Meaningful human oversight must be maintained to catch errors, override poor decisions, and ensure the technology operates in alignment with your company's values.
Charting a Course: Practical Steps for Your Business
The legal and ethical landscape for AI is evolving rapidly. To navigate it successfully, businesses should be proactive:
- Conduct an AI Audit: Identify all the AI systems used in your business and assess them for legal compliance, data privacy risks, and potential bias.
- Develop an AI Governance Policy: Create clear internal rules for the ethical development, procurement, and deployment of AI. Define roles and responsibilities for oversight.
- Prioritise Transparency: Be open with your stakeholders about how and where you use AI. Update your privacy policies and terms of service accordingly.
- Stay Informed: Keep up-to-date with guidance from regulatory bodies and emerging case law concerning AI in Australia.
- Seek Expert Advice: Before deploying a new AI system, consult with legal professionals who understand the intersection of technology, commercial law, and privacy.
AI offers a competitive edge that is too significant to ignore. However, embracing it without a clear-eyed view of the legal and ethical risks is a gamble. The businesses that thrive in the algorithmic age will be those that innovate responsibly, building a foundation of trust and accountability around their technology.

Senior Solicitor
Email: kristen@hntlegal.com.au
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