Updating E-commerce Website Terms for Lawful AI Use
E-commerce sites can face legal risks from AI, including unauthorized bots making purchases, discriminatory or privacy-invasive pricing, and chatbots generating false claims. Updating terms of use to disclose AI use and limitations, restrict unauthorized agents, and clarify pricing and data practices may reduce risk—but terms alone cannot eliminate legal or regulatory liability.
October 19, 2026 New York Law Journal By Jonathan Bick Bick is counsel at Brach Eichler in Roseland, and chairman of the firm’s patent, intellectual property, and information technology group. Adjunct professor at Pace and Rutgers law schools.
Increasingly, Internet sites are incorporating artificial intelligence (AI) software. This has increased legal liability for unauthorized data harvesting, infringing content, and prohibited communications. Amelioration of all three of these legal difficulties may be achieved by updating existing Internet site terms of use agreements.
Internet site terms of use agreements reduce legal risk by functioning as a contract between a website host and a visitor to the host’s website. In exchange for the website’s host agreement to allow a user to access the host’s website, a user memorializes an agreement regarding limits on behavior and liabilities, each party’s duties, and the resolution of legal disputes.
To amending Internet site terms of use to account for AI generated transactions and content, understanding what AI software may do on websites and how AI software does so. AI is used on Internet sites to automate functions, customize user experiences, and generate content.
AI does so in three ways. First, it integrates machine learning models into the website (to make websites more interactive, such as writing new computer user dialog options). Second, it uses algorithms to track user behavior (to generate content which makes websites more attractive, such as by generating a real-time price reduction). Third, it adds generative content software to the website (to suggest relevant user action, such as buying a particular good or service).
More specifically, e-commerce sites dynamic pricing by analyzing real-time market demand, inventory levels, and user browsing history to automatically adjust product prices.
These sites may also use semantic search engines which employ Natural Language Processing (NLP) to understand user intent, delivering accurate results even if the user types typos or vague queries. E-commerce customer support often uses AI software to resolve customer inquiries, track orders, and troubleshoot issues. Importantly, none of these transactions involves human intervention, which may result in non-traditional legal difficulties.
Non-traditional legal difficulties which result from integrating AI into e-commerce sites arise from autonomous decision-making by AI software, generative hallucinations, and failures to confirm to regulatory requirements. Three AI transactions are most likely to result in e-commerce site legal difficulties.
First, is the unintentional contract creation. E-commerce users increasingly use autonomous AI shopping agents to browse, negotiate, and buy products online. If an AI agent purchases an item from another’s Internet site, the contract may be unenforceable, because an AI is not a legal entity and thus no legally able to form a contract.
The issue can be address by amending an existing terms of use agreement.. More specifically, the agreement can be amended by adding a clause stating that only natural human persons (or explicitly authorized corporate entities) possess the capacity to form a binding contract on your site.
Additionally, the agreement can be amend to state that any order placed, negotiated, or facilitated by an unauthorized autonomous agent or scraping bot is void ab initio (void from the beginning). Finally, an amendment can explicitly reserves the right to cancel any orders flagged as machine-generated without liability, even after a confirmation email is sent.
The second e-commerce site legal difficulty due to AI use involves price fixing or discrimination, as well as privacy violations. An AI software may interface with a competitor’s pricing algorithm to maximize profits, which the Department of Justice can classify as antitrust collusion or price-fixing. If the AI software uses location of the customer as part of the dynamic pricing, it may result in unlawful transactions such as red lining.
AI recommendation engines personalizing product feeds, credit/financing offers, or loyalty rewards based on tracking algorithms. As result, AI software may create a pattern where protected classes (based on race, age, gender, or zip code) all are shown to be lower-quality products or restricted from payment financing options. This can result in civil rights litigation for algorithmic discrimination. Data-harvesting practices for AI training may result in litigation associated with privacy violations.
Amending the terms of use agreement may not eliminate this issue but reduce the legal risk. For example, by disclosing the use of automated algorithmic pricing tools and how they use personal data to inflate prices, and by offering an opt out option, a site may reduce regulatory penalties.
Hallucinations by AI tools on e-commerce sites may result in deceptive advertising. AI software may communicate false store policies, fabricating discount codes, or misrepresenting product specifications.
As noted above, AI is not a legal entity so regulatory bodies hold the e-commerce company—not the AI solely responsible for what an automated tool outputs. The Federal Trade Commission (FTC) actively enforces rules stating that if an AI distorts outputs or violates reasonable consumer expectations for accuracy, it constitutes an unfair or deceptive trade practice under Section 5 of the FTC Act.
Finally, the legal difficulties arising from AI hallucinations can be addressed by amending the terms of use agreement. More specifically, first, the agreement should disclose the AI use.
For example, it might state: “This Internet site uses artificial intelligence (AI), machine learning algorithms, and large language models (LLMs) for many purposes including but not limited to automated interactive customer support chatbots, product recommendation engines, and dynamic text generation. By interacting with these tools, you acknowledge that you are communicating directly with an automated software system and not a human representative.”
Next, the terms of use should be amended to disclose the risk. For example, by stating “You explicitly acknowledge and agree that generative AI systems have inherent technical limitations. These tools may occasionally produce outputs that are factually incorrect, outdated, biased, or entirely fabricated (commonly referred to as “hallucinations”), even if presented with high confidence or authority.”
Finally, the agreement should include an “as-is” clause. For example, “All AI-generated content, data, communications, and all product descriptions on this site are provided on an “AS-IS” and “AS-AVAILABLE” basis. We make no representations, guarantees, or warranties of any kind regarding the accuracy, completeness, reliability, or timeliness of any automated output.”
“You are solely responsible for independently verifying any critical information (including pricing, product configurations, shipping rules, and return policies) before acting upon or relying on AI-provided outputs. Any reliance you place on such output is strictly at your own risk. The Company disclaims all liability for any direct or indirect damages, losses, or costs arising out of your reliance on AI-generated content.” Implementing appropriate amendments in existing terms of use agreements for e-commerce sites can cap the financial damage a user may claim if the site uses AI inappropriately. In addition, appropriate amendments can protect the site by disclosing limitations of the site, for example as noted above that the website is provided on an “as-is” basis, protecting the site host from lawsuits alleging that information, products, or AI tools are inaccurate or contain errors