The Most Common Mistakes in AI-Related Contracts — and How to Avoid Them

On April 19th, an online meeting was held as part of ITU Legal Talks, organised by the IT Ukraine Association with the participation of legal partner — Eterna Law. The topic of the meeting was   ‘How to Avoid Mistakes in Contracts Concerning Al-Generated Content’.

 

 

The speaker of the event, Anton Hodosh, Senior Associate at ITU Partner Eterna Law, Deputy Chair of the Compliance & Al Committee at the Ukrainian Compliance Association, outlined typical mistakes in contracts related to AI-generated objects, their consequences, relevant case law, and shared recommendations on how to avoid them.

 

Among the information shared:

 

Due to limited regulation in Ukrainian legislation, such contracts require particular attention. The main risks arise not so much from legal gaps as from vague wording and poorly structured contractual terms.

 

In practice, legislation contains only a basic provision, so analogies with the regulation of other intellectual property objects are applied. This affects both the structure of contracts and the approach to defining the rights and obligations of the parties.

 

One of the most critical stages is the preparation for concluding a contract. This is where mistakes are most often made — mistakes that may later be impossible to correct.

 

In particular, it is important to consider:

• the subject matter of the contract must be clearly identified; otherwise, the parties may be deemed not to have reached agreement;
• it is necessary to verify that the object does not infringe third-party rights, as rights will not arise in such cases;
• it is important to determine whether the object is genuinely AI-generated or the result of human creative activity using modern technologies;
• the terms of use of the AI system used to generate the object should be carefully analysed.

 

Special attention during the webinar was also paid to contract structure and common drafting mistakes.

 

Incorrect definition of the subject matter or inconsistencies between contract provisions may result in the contract having no legal effect. In such cases, the parties may be required to return everything received.

 

It is also crucial to clearly distinguish the type of contract depending on the business purpose. Most commonly, this involves either a licence or an assignment of rights, which have fundamentally different legal consequences.

 

In practice:

• a licence grants permission to use the object under specific conditions;
• an assignment involves the transfer of rights to another party.

 

Drafting errors may lead to loss of rights or situations where the parties do not achieve the expected outcome from the contract.

 

Another risk area concerns contracts relating to objects that have not yet been created. In such cases, it is necessary to explicitly state that the object will be generated in the future and that rights or permissions will only take effect afterwards.

 

When drafting contract terms, it is important to specify all key parameters:

• the scope of rights and permitted uses of the object;
• the territory where the rights apply;
• the duration of the rights;
• in the case of a licence agreement, the type of licence.

 

Particular care should be taken when describing permitted uses. In contracts with a foreign element, relying on direct translations of Ukrainian legal terms should be avoided, as this may lead to differing interpretations. It is recommended to describe such uses as clearly and specifically as possible.

 

Additional risks relate to the form of the contract, timelines, and payment terms. In particular:

• contracts should be concluded in written or electronic form;
• the duration of rights for generated objects is 25 years and cannot be exceeded in the contract;
• in relations between residents, payments must be made in hryvnias, even if indexed to a foreign currency;
• different types of payments should be clearly distinguished within the contract.

 

The webinar also covered aspects of case law. While specific judicial practice regarding AI-generated objects is still emerging, courts already apply approaches by analogy with copyright law. This means that general principles developed in intellectual property disputes can also be applied to such contracts.

 

In conclusion, the expert emphasised that contractual work in the field of AI is primarily about precision. Clear definition of the subject matter, correct qualification of the contract, and detailed terms help avoid most risks and ensure a predictable outcome for businesses.

 

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