Contract law in the age of artificial intelligence (AI): legal validity and liability in AI-mediated agreements

Ismail, Suzi Fadhilah (2026) Contract law in the age of artificial intelligence (AI): legal validity and liability in AI-mediated agreements. In: ICLAS IX The 9th International Conference on Law and Society, 22-24 Sept 2026, International Islamic University Malaysia.

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Abstract

The rapid adoption of Artificial Intelligence (AI) systems is fundamentally challenging the foundational principles of traditional Malaysian contract law. These technologies autonomously draft, negotiate, and execute agreements, creating a gap between digital commercial reality and established legal doctrine. This development creates uncertainty about contract law requirements such as intention, consent, capacity, and liability in AI-mediated transactions. There has been discussion about whether this area could affect digital commerce and investment, particularly in Malaysia. This research aims to examine the current legal gap in Malaysian contract law to accommodate contractual transactions involving AI and to benchmark best practices from selected jurisdictions, including the United Kingdom, the European Union, the United States, and Singapore, by analysing their legislation and governance frameworks. The study also discusses relevant principles from Islamic law transactions to provide a broader perspective. Finally, the research proposes recommendations to enhance Malaysian contract law to accommodate AI mediated transactions and ensure fairness, certainty, and accountability. Using doctrinal legal research, this study reviews relevant provisions under the Contracts Act 1950, the Electronic Commerce Act 2006, and other related legislation to identify gaps and loopholes concerning AI-driven concepts such as machine-expressed intent, mutual consent, legal capacity, and so forth. The significance of the research is to ensure the current contract laws in Malaysia are equipped to regulate commercial transactions while protecting contracting parties from unforeseen risks associated with AI. Ultimately, the enhanced legal framework is positioned to establish clear accountability standards for AI systems, fostering public confidence in AI-driven commerce.

Item Type:	Proceeding Paper (Invited Papers)
Uncontrolled Keywords:	Artificial Intelligence, smart contracts, e-commerce, Contracts Act 1950, AI-mediated transactions
Subjects:	K Law > K Law (General)
Kulliyyahs/Centres/Divisions/Institutes (Can select more than one option. Press CONTROL button):	Ahmad Ibrahim Kulliyyah of Laws > Department of Civil Law
Depositing User:	Dr Suzi Fadhilah Ismail
Date Deposited:	22 Oct 2026 15:39
Last Update:	22 Oct 2026 15:39
Queue Number:	2026-10-Q5782
URI:	http://irep.iium.edu.my/id/eprint/131999
Indexed In:	UNSPECIFIED

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