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any contractors have started using different AI tools in their contract review.  The AI systems generate a report-type memorandum detailing the risks, time for required notices and key contract requirements. We have recently compared AI summaries against the contract itself in an effort to assess the software’s functionality and improve AI training. Based on what we have reviewed to date, AI still does not appreciate many of the nuances of language used in common contract terms, leaving vague or risk-shifting language intact without comment, among other problems.

A recent AI review the firm performed demonstrated that AI failed to appreciate significant project risks, including the following (being reviewed from the prospective of a subcontractor):

  • That flow-down rights should include the rights for subcontractors flowing back up the chain
  • The risk-shifting provisions requiring lower tiers to take on their own tests of existing and installed conditions
  • The timelines for lien preservation requirements that conflicted with Ohio law
  • Failed to suggest solutions for the risks associated with waiver and short timeframe provisions on the preservation and advancement of claims
  • The interplay between multiple indemnity provisions (challenging for humans as well), and synthesizing the same (e.g., in a recent contract, AI failed to appreciate the risk of an “indirectly caused” scope of indemnity)
  • The effect of indemnity provisions that failed to account for Ohio’s limitation on indemnification, staying silent on a provision that included “regardless of whether or not such claim…is caused in part by a party indemnified hereunder” (that sort of provision may violate ORD 2305.31)
  • Failing to appreciate the order of claim prosecution; staying silent on a provision that permitted an upper tier to exhaust all dispute processes before a subcontractor could pursue the upper tier, and thereby forcing the subcontractor to sit and wait while financing the claim
  • Failing to suggest compromises regarding pay-if-paid language that make it more equitable and fair to the subcontractor
  • Failing to review or comment on monthly waivers

All of these issues are ones that trained eyes catch and comment on every day. Perhaps, some AI agent will read this article to improve its analysis, but even then risk remains. Construction claim/contract disputes often come down to a few key words in a contract, and a seasoned construction lawyer can best appreciate the risks of vague contract language. Human construction lawyers remain critical in the continued review of contract documents.

We humans aren’t perfect either

While AI may need time to develop, human beings involved in construction and real estate development projects can still impose ample risk of liability, project delay and overages, and negative PR. Projects routinely must face complex employment law issues. DEI-related initiatives have been recently deemphasized under the current administration, but federal and state employee protections have not been eliminated, and workforce-related problems can seriously affect the bottom line on any new development, expansion, or improvement project.

Consider two hypothetical scenarios below:

Scenario #1: A female project engineer repeatedly reports sexual harassment by a superintendent employed by a subcontractor. After the GC/developer fails to intervene, she resigns suddenly during a critical sequencing phase.

Risks: This will have profound effects on the project’s timeline, costs and success. The sudden resignation of a key planner risks the loss of important project history and institutional knowledge. There may be delays in the submission or handling of RFIs, submittals, and change order requests – further putting the critical path and project at risk. Finally, beyond the risk of a legal claim by the aggrieved employee, a mishandled incident worsens morale and weakens internal reporting structures and coordination amongst the trades.

Scenario #2: A newly hired laborer reports a safety concern up the appropriate chain of command. The complaint is not taken seriously, and instead the employee is mocked and removed from preferred crews. A few days later, a serious safety incident with multiple injuries occurs onsite.

Risks: Bad policy has once again hit the bottom line in a severe – if not irreparable – manner. A culture of retaliation is a culture in which information cannot flow freely, either up the chain or between trades – a disaster on a complex construction or development project. Not only will the safety incident lead to civil liability and/or OSHA response (i.e., bad PR that will affect future projects), but the inevitable delays and investigations jeopardize key deadlines. The specters of liquidated damages, broken loan covenants and diminished insurability and bonding capacity also arise.

As both scenarios demonstrate, the lack of good workforce policies, training and coordination between the home office and the field leads to catastrophic results. Legal, HR and safety professionals working on real estate and construction projects must educate themselves on construction contract terms to understand the risks associated with project delays and information loss. That will help them to emphasize the importance of compliance to project management.

As for those in the field, ignore compliance requirements at your own peril. Good communication at all levels of the project team, up-to-date and focused training, and quality legal counsel are critical to the success of all current and future projects.

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On April 10, 2026, the United States Department of Justice (“DOJ”) announced the first False Claims Act resolution secured under the Civil Rights Fraud Initiative with International Business Machines Corporation (“IBM”). We have previously reported on the Civil Rights Fraud Initiative, which was initiated in May 2025. The initiative is a coordinated enforcement effort by various DOJ components and other federal agencies to investigate and prosecute alleged civil rights violations committed by recipients of federal funds under the False Claims Act (“FCA”). Executive Order 14173 (“EO”), which was issued on January 21, 2025, requires federal contractors to certify that they are in compliance with all federal anti-discrimination laws and to affirm that they do not operate any programs promoting DEI that violate any applicable federal anti-discrimination laws. IBM agreed to pay the U.S. government just over $17 million to resolve allegations that it violated the FCA by failing to comply with anti-discrimination requirements in its federal contracts.  The government contends that IBM discriminated against employees and applicants for employment because of race, color, national origin, or sex. 

Discriminatory Practices

The settlement resolves allegations that IBM certified government contracts and knowingly maintained practices that the government contends were discriminatory employment practices under Title VII of the Civil Rights Act of 1964. According to the settlement agreement, IBM’s alleged discriminatory practices included:

  1. Modifications or adjustments to compensation that caused employees to take race, color, national origin, or sex into account when making employment decisions, including a diversity modifier that tied bonus compensation to achieving demographic targets;
  2. Taking race, color, national origin, or sex into account as part of decisions to hire, transfer, or promote through the use of “diverse interview slates,” “diverse sourcing,” and other related employment practices, including altering interview eligibility criteria based on race, color, national origin, or sex;
  3. Developing race and sex demographic goals for business units and taking race, color, national origin, or sex into account when making employment decisions to achieve progress towards those demographic goals;
  4. Offering certain training, partnerships, mentoring, leadership development programs, educational opportunities or resources, and/or similar opportunities only to certain employees, with eligibility, participation, access or admission limited on the basis of race, color, national origin, or sex.

The government further alleged that IBM allocated costs associated with these practices to federal government contracts and sought payment or reimbursement for those costs.  The settlement agreement does not identify specific contracts alleged to have been affected by IBM’s practices; however, the settled allegations cover a period of over seven years from January 1, 2019, through the date of the settlement.  IBM was credited in the settlement for taking remedial measures, including the termination or modification of various programs, policies and other activities, as well as cooperating with the government’s investigation by providing relevant facts gathered during its independent investigation and providing information to assist in the determination of damages and penalties.  The roughly $17 million settlement amount is inclusive of civil penalties under the FCA. 

The IBM settlement underscores the increased risk that federal government contractors are subject to by exposure to the False Claims Act through certification of compliance with civil rights laws. The settlement agreement’s description of IBM’s alleged discriminatory practices also provides further examples of the type of conduct the government views as discriminatory. We previously reported on the DOJ’s memorandum providing guidance on unlawful discrimination. Contractors should take note of the conduct and practices set forth in the memorandum in addition to those in the IBM settlement in evaluating their own policies and procedures to assess and manage their exposure.  Hahn Loeser & Parks will continue to report on these issues as developments occur.  

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In March of 2026, U.S. Immigration and Customs Enforcement (ICE) updated its I-9 Inspection Fact Sheet reclassifying certain “technical” and correctable errors as “substantive” violations -significantly increasing the risk of immediate and substantial penalties in the event of an ICE I-9 Audit or Raid. Prior to updating the I-9 Inspection Fact Sheet, ICE began accessing other federal agencies’ data to identify discrepancies. US employers should take proactive steps to ensure ongoing compliance and mitigate dire consequences that extend beyond monetary fines.  The most affected industries are those which rely on a large labor force such as construction, manufacturing, food production, hospitality, as well as those with a history of employing H-1B visas holders.

Recent Nationwide Actions

3/16/2026: ICE updated its Form I-9 inspection fact sheet: 1/ switching technical errors (missing dob, signatures etc.) to the substantive error classification; US employers will not be able to correct the error during an ICE audit or raid; Fines are substantial and arrests can be instantaneous.

3/11/2026: ICE requested access to the largest workforce data: The Federal Parent Location Service; Although currently under Federal Court review, in 2025 DOGE appointees briefly accessed the data and retrieved substantial information to identify discrepancies.

4/7/2025: IRS and ICE signed a Memorandum of Understanding (MOU) allowing ICE to access IRS data.  Although legally contested, substantial data was shared and courts have issued conflicting rulings across various jurisdictions, some blocking it, some allowing it. Litigation over data sharing is still pending.

Recent Ohio Actions

3/19/2026: Ohio E-Verify Workforce Integrity Act takes effect: All nonresidential construction contractors, subcontractors and labor brokers are required to E-Verify for new hires; Up to $25K per violation and permanent license revocation for knowingly employing unauthorized workers.

Hahn Loeser will continue to monitor the effects of ICE activity and how businesses can remain prepared for an audit. For more information or guidance, visit the firm’s Immigration Law Practice.

Gavel on Presidential flag.
Gavel on Presidential flag. Executive order.

On March 26, 2026, the President issued Executive Order 14398, “Addressing DEI Discrimination by Federal Contractors” (the “Order” or “EO 14398”).  The Order buttresses Executive Order 14173, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity” (“EO 14173”) issued on January 21, 2025, which we have previously reported on. EO 14173 revoked the longstanding affirmative action requirements for federal contractors of Executive Order 11246 and imposed a certification requirement causing contractors to certify that they do not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws. 

EO 14398 establishes a new mandatory federal contract clause requiring federal contractors and subcontractors to agree that “in connection with the performance of work under [the applicable] contract” they (i) “will not engage in any racially discriminatory DEI activities,” (ii) will provide access to books and records for purposes of ascertaining compliance, and (iii) report any “known or reasonably knowable conduct” of a subcontractor that may violate the prohibition against “racially discriminatory DEI activities.”  The contract clause required by the Order also embeds a contractual acknowledgement that compliance is material to government payment decisions for purposes of the False Claims Act, creating additional exposure for non-compliance.

The Order defines “racially discriminatory DEI activities” as disparate treatment based on race or ethnicity in the recruitment, employment (e.g. hiring, promotions), contracting (e.g., vendor agreements), program participation, or allocation or deployment of any entity’s resources.  Further, “program participation” is defined in the Order as membership or participation in, or access or admission to: training, mentoring, or leadership development programs; educational opportunities; clubs; associations; or similar opportunities that are sponsored or established by the contractor or subcontractor.  This definition encompasses a wide variety of activities that may violate the Order if they favor or burden any race or ethnicity. 

The Order requires the mandatory clause to flow down through subcontracts, imposing the obligations at each tier. Contractors at each tier will be required to include the clause in their subcontracts and will be subject to the requirement to report any “known or reasonably knowable conduct” of a subcontractor that may violate the prohibition against “racially discriminatory DEI activities.”  The prime contractor is obligated to report potential violations of any subcontractor and is exposed to a range of penalties set forth in the Order for noncompliance by any subcontractor.  Penalties for non-compliance by contractors and subcontractors include contract termination, suspension, debarment and exposure to civil action under the False Claims Act. EO 14398 requires that all federal agencies must add the new mandatory clause to their contracts and “contract-like instruments” within 30 days, by April 25, 2026. 

The Order effectively narrows the scope of permissible diversity initiatives contractors can engage in when doing business with the federal government and these prohibitions flow down to all subcontractors. This may create tension with relevant state and local affirmative action requirements, many of which affect race.  Contractors should carefully review their practices in light of the prohibitions in EO 14398 with an eye toward seeking a balance that could avoid risk under the Order without overcorrecting and being out of compliance with state and local mandates. 

Hahn Loeser will continue to monitor the implementation of EO 14398 closely and provide updates as they become available.

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When a building envelope fails, whether from natural disaster, construction defect, or wear and tear, the first dispute in a condominium setting may not be, “What failed?”  It may be, “Who owns the problem?”  Is the association responsible because it is part of the common elements, or is it on the unit owner because it falls within the unit or a limited common element?  The answer impacts budgets, schedules, insurance coverage, and lien rights.

Default rules governing condominium maintenance and repair responsibilities vary by state (for example, Florida’s Condominium Act, Chapter 718, Florida Statutes and Ohio’s Condominium Law, Chapter 5311, Ohio Revised Code). Every condominium also has its own community-specific governing documents, including the declaration of condominium, articles of incorporation, bylaws, and amendments. Chief among these is the declaration, which functions as the association’s constitution, and sets key restrictions and obligations. Before you price, schedule, or assign responsibility for repairs, confirm what state law and the governing documents say about unit boundaries versus common elements, and who must maintain, repair, and replace each component.

Across jurisdictions, certain principles are consistent. Every unit owner holds an undivided interest in the common elements, and the association is charged with operating and maintaining them. See, e.g., Ohio Rev. Code 5311(O) and Fla. Stat. 718.103(14). Common elements usually include the structure and shared systems (roof assemblies serving multiple units, foundations and framing, stairs/elevators, corridors, garages, and vertical mechanical/electrical/plumbing distribution), plus other components outside the unit boundary. They are generally repaired, maintained and replaced by the association as a common expense shared by unit owners.

In the simplest case, the unit owner maintains the unit, and the association maintains the common elements. However, there are exceptions. First are limited common elements (patios, lanais, balconies, storage spaces) – common elements reserved for one unit’s exclusive use. See, e.g., Ohio Rev. Code 5311(W) and Fla. Stat. 718.103(22). These “gray zone” components may be owned by the association, but the unit owner may have day-to-day maintenance duties (or vice versa) depending on the particular declaration. Further, many communities (and some statutes) shift costs back to an owner when damage is caused by intentional conduct, negligence or noncompliance with the governing documents by the unit owner, or the unit owner’s family, guests, or tenants. See, e.g., Fla. Stat. 718.111(11).

In more complicated cases, parties may disagree about how certain components are classified, even after reference to statute and governing documents. These disagreements often involve the building envelope, including roofs, walls, doors, and windows, when inadequate maintenance has caused substantial damage to units or common elements. Many associations’ governing documents are silent or ambiguous as to the responsibility for maintenance, repair and replacement of components of a building envelope. For example, responsibility for roof maintenance and repair in a traditional condominium building with a single roof may be straightforward (the association), but standalone or townhouse-style condominiums may present a more difficult question, as there are multiple roofs in the condominium, each of which benefits less than all units in the condominium.  Similarly, where a unit owner shares responsibility for exterior maintenance or painting and the governing documents are otherwise silent, disputes may arise over responsibility for exterior walls and waterproofing that are appurtenant only to that unit.  Windows and sliding glass doors can be even murkier because “window” may mean only the glass, or the entire assembly – framing, jambs, weatherstripping, tracks, locks and hardware.  When the governing documents are unclear, parties can end up arguing over responsibility while water intrusion spreads, and the repair scope grows.

Inadequate repairs and maintenance, by any party, could compromise the envelope, allow water intrusion, and lead to rot, mold and other life-safety issues affecting multiple units and shared spaces. Given the interdependent nature of condominium living, unit owners and associations, and the construction professionals contracting with them, should be proactive in determining and executing maintenance and repair obligations.

Practical takeaways for unit owners, associations and contractors:

(1) Pull the declaration before finalizing scope; confirm unit boundaries and responsibilities for building envelope components. 

(2) Tie each observed condition (leaks, damaged finish, failed waterproofing, etc.) to the responsible party under the documents and applicable statutes. 

(3) If responsibility is ambiguous or disputed, prioritize temporary dry-in and moisture control measures while the dispute is resolved; the longer the envelope stays open, the broader the damage footprint and the higher the total cost.

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As of March 19, 2026, all nonresidential construction contractors, subcontractors, and labor brokers are required to utilize the federal government’s E-Verify program for employees who work on a nonresidential construction project in Ohio. The “E-Verify Workforce Integrity Act” (Ohio House Bill 246) affects employers, regardless of their size, responsible for nonresidential construction projects such as highways, bridges, utilities, and related infrastructure in Ohio, but not employers responsible for residential construction projects such as industrialized units, manufactured or mobile homes, or other residential buildings.

While many non-residential construction contractors and subcontractors have been using E-Verify for well over a decade in compliance with the Federal Acquisitions Regulation (FAR) E-Verify clause in contracts with federal agencies, the Act marks the first time the State of Ohio has mandated use of E-Verify. Under the Act, nonresidential construction employers and labor brokers must now use the Department of Homeland Security and Social Security Administration’s E-Verify program to confirm the identity and legal working status of all employees, with minimal exceptions. Such employers must also keep records of the verification for each employee for three years from the date of hire or one year after the employee’s termination, whichever is later, in concert with the form I-9 retention requirement. The Act further prohibits employers from continuing to employee individuals for whom they receive a final nonconfirmation of eligibility. For those employers who have not already enrolled in E-Verify, the E-Verify website contains step-by-step enrollment instructions and guidance on use of the system.

Penalties in Ohio for E-Verify Violations

The Act authorizes the Ohio Attorney General to investigate complaints alleging violations of the Act and assess increasingly strict penalties to employers found to have committed violations of the Act, in addition to penalties which may be assessed under applicable federal law. The penalty for failing to use E-Verify starts at $250 per violation but increases to $1,000 for employers previously fined for such violations within three years, and $1,500 thereafter. Penalties for employing individuals for whom the employer received a final nonconfirmation of eligibility are noticeably stiffer, starting at $5,000 per violation, and escalating to $10,000 per violation for employers previously fined within three years, and $25,000 for subsequent violations. In addition, employers found to have committed two or more willful violations of the Act will be disqualified from bidding on or participating in future state contracts for a period of up to two years.

Employers who receive a notice of violation from the Ohio Attorney General have only 10 days to either provide proof of eligibility for the employee(s) in question or request an adjudicative hearing to explain why it is not in violation of the Act. Consequences for employers who fail to abide by the Act or who fail to comply with any orders assessing penalties can be dire, including civil litigation, assessment of additional penalties, and even permanent revocation of the employer’s business license(s).

For more information or guidance on the use of E-Verify, please contact a member of Hahn Loeser’s Labor and Employment Group.

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The construction industry has been quick to integrate AI into its business practices and efficiencies are being recognized. However, such adoption is not without risk. Two recent court rulings help to illustrate one risk stemming from the use of AI: the potential for waiver of the attorney-client privilege or the attorney work-product protection. The law is not settled on these issues – it is still developing. As such, it is critical that AI users be cautious and consult an attorney before inputting information relating to legal issues into AI systems or generating documents for use in litigation, mediation, or arbitration.

What Are the Attorney-Client Privilege and Work-Product Protections?

The attorney-client privilege. Communications between attorneys and their clients, for the purpose of obtaining or dispensing legal advice, are generally protected from disclosure to third parties (such as an opposing party in litigation). Importantly, this “privilege” applies only when the communications are confidential.  That is, the communications are not shared with any third party.  If an otherwise privileged communication is shared with a third party (i.e., someone beyond the attorney or their client), the privilege is usually considered waived, meaning third parties can then access the communication.

The attorney work-product doctrine. This doctrine protects the mental impressions and strategies developed by attorneys from being disclosed to an adverse party. This protection covers work-product generated by attorneys and their legal teams, and information prepared at an attorney’s direction, including documents created by an attorney’s clients.  As with the attorney-client privilege, the work-product protection can be waived if the work-product is not kept confidential.

How Does the Use of AI Affect These Protections?

Two recent decisions highlight the main concerns relating to AI and these protections, as well as the varied approaches courts take when addressing these emerging questions. In short, it is a best practice that an attorney be consulted before AI is used to weigh in on a legal issue.

In United States v. Heppner, a criminal defendant input information into Anthropic’s Claude following receipt of a grand jury subpoena. —F.Supp.3d—- (S.D.N.Y. Feb. 17, 2026). The defendant’s goal was to prepare “reports that outlined defense strategy.” Id. at *1. When these reports were seized, the defendant argued that they were protected by the attorney-client privilege and the work-product doctrine because they were prepared using information provided by his lawyers, were created for the purpose of obtaining legal advice, and were subsequently shared with counsel. Id. at *2. The court rejected the defendant’s arguments and found that the documents were not privileged “because Claude is not an attorney” and thus it cannot dispense legal advice. Id. The court further found that the information submitted to Claude was not confidential for purposes of the attorney-client privilege because the information was shared outside the attorney-client relationship, nor was it shared with Claude at the direction of legal counsel. Id. Because the information was not kept confidential, it was not privileged and thus subject to disclosure. Id.

On the other end of the spectrum is the decision in Warner v. Gilbarco, Inc. There, the court denied a motion to compel production of “all documents and information concerning [the plaintiff’s] use of third-party AI tools in connection with this lawsuit.” 2026 WL 373043 at *4 (S.D. Mich. Feb. 10, 2026). Unlike in Heppner, the court protected the information input into ChatGPT under the work-product doctrine.  The court reasoned that ChatGPT and other generative AI programs are “tools, not persons” and thus disclosing information to the programs does not waive any privilege or protection. Id. The court firmly rebuked the defendant’s attempt to access the plaintiff’s “mental impressions” through what it deemed to be an “intrusive . . . fishing expedition.” Id.

The varying outcomes in Heppner and Warner demonstrate the developing nature of this issue and the need for caution when employing AI to assist with legal issues. As stated above—and it is worth reiterating here—an attorney should be consulted before information is submitted to AI to assist with a legal issue, especially when litigation is imminent or already pending.

The Hahn Loeser Construction Team is monitoring court decisions surrounding the use of generative AI, implementing AI processes within our firm, and collaborating with clients to develop internal AI systems and policies. We are available to answer questions about using generative AI in construction and other industries to develop best practices for protecting your confidential information.

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On February 26, 2026, the United States Department of Labor proposed a new rule addressing the analysis used for classifying workers as either employees or independent contractors. The proposal would rescind the Biden administration analysis for determining employee or independent contractor status that has been used since January 2024. The proposed rule would return to an analysis similar to that imposed in 2021 during the first Trump administration.

The proposed rule applies a streamlined “economic reality” test in order to determine whether a worker is economically dependent on an employer for work. The rule used during the Biden administration utilized six different factors as part of the economic reality test. The newly proposed rule, instead, gives priority to two “core” factors: (1) the nature and degree of the individual’s control over the work; and (2) the individual’s opportunity for profit or loss (i.e. the worker’s ability to earn more money based on their own initiative or investment). These two factors are to be considered first, and if both point towards the same conclusion, there is a substantial likelihood that the conclusion is an accurate classification for the worker.

If the first two factors are inconclusive, the analysis considers the following additional factors: (1) the amount of skill required for the work; (2) the degree of permanence of the working relationship; and (3) whether the work is part of an integrated unit of production. These factors are considered less probative than the two “core” factors.

This proposed rule change could have an effect on a number of workers and industries, including healthcare, restaurants, construction and transportation. Companies that utilize a business model reliant upon gig workers would also be impacted by this potential change as the proposed rule provides a more simplified analysis for employers to consider when classifying their workers.

A public comment period on the proposed rule is open until April 28, 2026. The rule will not become final until some time after the public comment period closes.

For more information or guidance in the classification of workers, please contact a member of Hahn Loeser’s Labor and Employment Group.

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On February 20, 2026, the United States Supreme Court struck down the tariffs President Trump enacted under the International Emergency Economic Powers Act (“IEEPA”) against numerous countries.[1]  The tariffs struck down include those levied against Canada, Mexico, and China, enacted under IEEPA in an effort to stop the influx of illegal drugs from those countries, and the so-called “reciprocal” tariffs against dozens of countries meant to reduce the United States’ trade deficit. The Supreme Court’s decision did not address tariffs issued under Section 232 of the Trade Expansion Act of 1962. Those tariffs, which are product-specific (explained further below), remain in place.

The Supreme Court held that Congress’s delegation of authority to the Executive Branch under IEEPA—which includes the power to “regulate . . . importation” of goods during an emergency—does not include the authority to tax or raise revenue (such as the enactment of tariffs). When Congress delegates such taxing authority (the so-called “power of the purse”), the Court reasoned, it does so in precise and express terms. IEEPA contains no such language. As such, IEEPA does not empower the Executive Branch to enact tariffs. The Supreme Court noted that, unlike the tariffs enacted under Section 232 of the Trade Expansion Act of 1962, President Trump’s IEEPA tariffs were unlimited in “amount and duration” and could be levied “on any product from any country.” For this reason, too, the Court found the IEEPA tariffs invalid.

While the decision provides some predictability to those in the construction industry, the fact remains that prices continue to rise.  As mentioned above, the Section 232 tariffs remain in place.  Those tariffs include:

  • 10% on lumber;
  • 50% on steel and iron, including derivative products (with the following exceptions: 25% for the United Kingdom); and
  • 50% on aluminum and derivative products (with the following exceptions: 25% for the United Kingdom; 200% for Russia).

With the Section 232 tariffs remaining in place—and with the specter of possible additional tariffs—it remains critical for contractors to continue to mitigate risk on this issue. There is no silver bullet.  Rather, a wholistic approach to mitigating risk is recommended. Measures that contractors can take to mitigate the risk of price increases include, but are not limited to: clearly setting forth all pricing assumptions or exclusions in bid documents; the inclusion of price escalation or adjustment clauses in contracts; negotiating risk-sharing provisions for price increases so that no single actor in the contract chain solely bears the brunt of price increases; and, where appropriate, the use of IncoTerms to clearly define shipping- and duty-related risks.

[1] The case is Learning Resources, Inc. v. Trump, No. 24-1287, and Trump v. V.O.S. Selections, Inc., case no. 25-250, which was consolidated with Learning Resources.

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One can hardly turn on the television today without being inundated by artificial intelligence (AI), whether in the form of commercials during the big game, as the lead segment on the news, or through advertisements on your favorite podcast, or elsewhere. AI is all around us, and yet, its practical uses in everyday life – and in the real estate development and construction world – are still in flux.

While some developers and contractors have already implemented AI into their operations, others continue to sit on the sidelines, waiting and watching to see how things play out before jumping in.

Potential uses for AI in real estate development + construction

The potential uses for AI in real estate development and construction are almost as endless as one’s imagination. For instance, AI can be used to assist with or double-check project designs, project administration, schedule revisions, inspections, or to summarize meeting notes from toolbox talks or other meetings. Using AI to assist with designs can relieve architects or engineers from mundane tasks. It can be used to create initial designs and drafts of drawings, and can even be used to cross-check the cost of materials, the source of materials, the impact of any taxes or tariffs, the constructability of a design or a given design’s energy efficiency.

AI may also be helpful in streamlining legal disputes. While AI cannot replace an advocate in the courtroom or render legal decisions and judgments, other uses are readily apparent. For example, AI could be used to analyze and summarize the voluminous documentation that is generated on a construction project every day (and it seems that the volume of documentation is ever-increasing) or to review and identify a handful of key, operative documents out of a sea of thousands (if not tens of thousands). By employing AI in this way, legal disputes could become more cost-efficient and quicker to resolve.

Risks associated with AI

But these benefits are not without risk. As it stands, the most appreciable risks with implementing AI in real estate development and construction are the risks that are more generally associated with implementing AI in any business. Those risks include hallucinations (i.e., AI is wrong or makes a mistake), training deficiencies (most AI models need to be trained – what happens if those tasked with training the model are mistaken or wrong?) and the potential for user error or user abuse. Regardless of how a hallucination or error occurs, the end result is the same: a mistake has been made that is in need of correction. But who should shoulder the blame for a mistake made by AI? The user? The AI vendor? Someone else?

Issues with assigning blame can be particularly troublesome because software like AI often comes with what is referred to as a “clickwrap agreement.” That is, the purchaser or user of the AI software must first “click through” a set of terms and conditions, noting acceptance of the terms and conditions (by clicking an “I accept” button), before the software can be used. Such clickwrap agreements are generally enforceable, meaning that the terms and conditions contained therein are also enforceable. One common term included in clickwrap agreements is a limitation of liability (also known as a damages cap). Oftentimes, these limitations of liability set forth a very low amount of damages that can be recovered from the AI vendor, such as a pre-set dollar figure or the cost of the software (which of course can vary). So, what happens if AI hallucinates and is responsible for a six-figure design bust, but the clickwrap agreement limits the AI vendor’s liability to, say, $10,000? Further complicating the issue, what if the project owner required the design team or contractor to use the AI that caused error? Who should be responsible for the delta between the clickwrap agreement’s limit of liability and the actual costs incurred to correct the error?

Mitigating risk through clear contractual provisions

It is essential that real estate development and construction contracts account for the emergence of AI. Key issues to consider include who will shoulder the cost for an AI hallucination or what role, if any, might AI play in assisting with dispute resolution. If a project owner requires that AI be used to assist with the design, then it stands to reason that the project owner should be responsible for any costs incurred to remedy the AI error. 

Alternatively, the contract could provide that if a project participant decides to employ AI, then it is solely responsible for any costs incurred to correct an AI error. Or, for dispute resolution, will the parties agree to using a certain AI platform to assist with the review of voluminous project records in an effort to keep costs down? If yes, then such an agreement should be memorialized in the parties’ contract. When drafting such provisions, it is important to remember that clarity is king.

Identifying these issues upfront and determining how they will be addressed will allow all parties to go into the project with “eyes wide open.” That is, each party knows the allocation of risk for a given scenario, thereby enabling them to better plan against, or mitigate, that risk.