- 08-Jun-2025
- Cyber and Technology Law
AI (artificial intelligence) and algorithm-driven products, which include self-driving cars, medical diagnostic tools, smart home devices, and financial algorithms, are increasingly being integrated into consumer products. These products, although powered by complex algorithms or machine learning models, can fail or cause harm just like traditional products. As a result, AI and algorithm-driven products may fall under product liability laws when they cause harm or damage to consumers. The legal framework for holding developers or manufacturers accountable is still evolving, but there are avenues for consumers to seek recourse in the event of harm.
Like any other product, AI or algorithm-driven products are expected to be safe and function as advertised. If an AI system malfunctions or causes harm due to a defect (such as a flawed algorithm, improper training, or lack of oversight), the manufacturer or developer can be held liable.
A defect in the algorithm or machine learning model could result in incorrect decisions or predictions, leading to financial losses, safety issues, or privacy violations.
Errors in AI-driven systems, such as incorrect diagnoses in healthcare or flawed decision-making in autonomous vehicles, could result in harm to users.
Developers of AI products and algorithms have a duty to ensure their products are free from defects and are safe for consumers. This includes testing, monitoring, and updating the AI models to correct any issues that arise.
AI products should undergo rigorous testing to ensure they function as intended, with a particular focus on safety in high-risk applications (e.g., medical AI, autonomous vehicles).
Developers should continually monitor and update the AI algorithms to ensure they adapt to real-world conditions and do not cause unintended harm.
In India, the Consumer Protection Act, 2019 provides consumers with rights and remedies if they are harmed by defective products, including AI-driven ones. The Act protects consumers against:
If an AI product or algorithm-driven product fails to meet the promised specifications or causes harm due to design or manufacturing defects.
If an AI system provides a service (e.g., recommendations, diagnostics, or transactions) that leads to consumer harm, the developer or provider could be held responsible for providing a defective service.
If an AI product causes harm due to a failure in the algorithm or negligence in its development, consumers may file a tort claim. This can be based on:
If the developer failed to exercise reasonable care in designing, testing, or deploying the AI system.
In some cases, the developer may be held strictly liable for harm caused by the product, regardless of negligence, especially if the AI product is inherently dangerous or has known risks.
AI and algorithm-driven products often come with terms and conditions that outline the performance and liability of the product. These terms might include warranties or disclaimers regarding the system’s performance, but they cannot waive the responsibility for significant harm caused by a defect or failure in the system.
If the product doesn’t perform as promised (e.g., an autonomous car fails to detect obstacles), consumers can claim breach of warranty or breach of contract.
A self-driving car might fail to recognize an obstacle or misinterpret traffic signals due to a flaw in its AI system, causing an accident or injury.
An AI-powered diagnostic tool might provide an incorrect diagnosis, leading to delayed treatment or harm to a patient.
A financial AI algorithm might make poor investment decisions, resulting in significant financial loss for consumers or investors.
AI-driven smart home products, such as thermostats or security systems, could malfunction, leading to property damage, security breaches, or safety risks.
Consumers who suffer harm due to defective AI products can file complaints under the Consumer Protection Act, 2019. They can seek:
Consumers can file a product liability lawsuit against the manufacturer, developer, or service provider if the AI product caused harm due to a defect in design, manufacturing, or failure to warn of potential risks. The lawsuit could seek:
If the AI product caused harm due to negligence in its development or failure to follow required safety standards, the injured party can file a negligence lawsuit. The defendant would need to prove that their AI system failed to meet the standard of care expected for such a product.
Regulatory bodies such as the Ministry of Electronics and Information Technology (MeitY) or the Data Protection Authority may be involved in cases where AI products violate data protection laws or compromise user privacy. They can investigate complaints and impose penalties on companies that fail to comply with safety and privacy standards.
If a defective AI product affects a large group of consumers (for example, a financial algorithm that causes widespread losses), affected individuals can join together in a class action lawsuit to seek compensation.
An AI-based self-driving car malfunctions due to a flaw in its decision-making algorithm, causing an accident.
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