Comprehensive analysis of AI applications under the Saudi Civil Transactions Law — legal classification, automated contracts, tort liability, and compensation.
A rapid tech revolution driven by artificial intelligence raises a fundamental question: how can Saudi legislation accommodate these complex technological novelties? The flexibility of Saudi law is evident in the Civil Transactions Law (Royal Decree No. M/191 of 1444H), which provides comprehensive rules for handling the legal implications of AI technologies in both contractual and tort contexts.
From a strict legal perspective, AI algorithms and systems cannot be granted legal personality. The Civil Transactions Law defines persons as natural persons (existence begins at live birth) and legal entities (state, companies, endowments). Accordingly, the system classifies AI as a non-material thing that can be the subject of financial rights, and as property because it represents material value used in transactions.
Many platforms rely on AI to conclude contracts (e.g., automated trading or e-commerce sales). According to the law, a contract is formed by the linkage of offer and acceptance, with consent verified by the concurrence of two legally capable parties. Since AI lacks capacity, the expression of consent is attributed to the person (programmer, owning company, or operator) who designed the system. Gross errors violating core programming (e.g., selling for zero price) may nullify consent, while errors within acceptable parameters (e.g., normal price volatility) keep the contract valid and binding.
Civil tort liability is paramount when using AI, such as medical errors or autonomous-vehicle accidents. The law provides that any fault causing damage obliges the perpetrator to compensate. If the victim proves human error in programming or data entry, the programmer or user is liable. Additionally, anyone who takes guardianship of objects requiring special care is responsible for any damage caused — AI systems are classified as such, so the owner or operator bears liability without needing to prove direct fault.
The guardian concept extends beyond the material owner: the end-user owner is guardian during actual operation; the manufacturer or software developer is guardian if they retain algorithmic control; cloud-service providers are not guardians unless they play a direct role at the moment of damage. Compensation is apportioned according to each guardian's degree of control.
When liability is established, full compensation covers material losses, lost earnings (as a natural result of the harmful act), and moral damages including psychological impact. The operator can escape liability by proving a break in causation through force majeure, third-party fault, or unforeseeable AI behavior that could not be anticipated even with the highest professional diligence.
A Level-4 autonomous vehicle attempts to avoid a bird, changes lane, and collides with a pedestrian. The injured pedestrian sues the guardian (vehicle owner). The owner seeks contribution from the manufacturer if they did not intervene. The manufacturer claims foreign cause if the behavior was unforeseeable. The judge obliges the mandatory insurance fund to compensate first, then refers the dispute to experts for fault apportionment. If experts cannot determine liability, the damage is treated as force majeure unless a specific statutory provision applies.
The Saudi Civil Transactions Law offers a flexible legal framework that can address the technological challenges posed by AI applications. No explicit definition of AI is required; the concepts of consent, guardianship of things, and full compensation cover all future scenarios. This framework provides a secure environment for technological innovation in the Kingdom while ensuring the protection of parties' rights with fairness and rigor.
If you are an AI developer or tech investor, we recommend including clear terms in your contracts that specify the responsible party for any damage caused by system operation, adequate insurance coverage, and an arbitration clause referring to the Saudi Center for Commercial Arbitration. Investing in proper legal drafting today protects you from substantial compensation claims tomorrow.