# Legal Personhood - Contracts (Part 1)

*This is part 11 of a series I am posting on LW. Here you can find parts* [*1*](https://www.lesswrong.com/posts/DHJqMv3EbA7RkgXWP/legal-personhood-for-digital-minds-introduction)*,* [*2*](https://www.lesswrong.com/posts/58e8EycHHGMYxiaoo/the-bundle-theory-of-legal-personhood),  [*3*](https://www.lesswrong.com/posts/rhCPxXmKMhcmA3bMR/problems-with-legal-personhood-as-a-concept), [4](https://www.lesswrong.com/posts/2HWiwD6npBACPWbKz/formalizing-rights-and-duties-for-legal-personhood), [5](https://www.lesswrong.com/posts/syrmCG8vRfhmsH8pn/legal-personhood-and-the-enforcement-gap), [6](https://www.lesswrong.com/posts/4m2MTPass3Ri2zZ43/legal-personhood-three-prong-bundle-theory), [7](https://www.lesswrong.com/posts/u8SFBdmK6bLgW25Ak/legal-personhood-types-of-consequences), [8](https://www.lesswrong.com/posts/nZPzzbFFkvj2kaauA/legal-personhood-tort-liability-part-1), [9](https://www.lesswrong.com/posts/4yBrCnEZ7CYgQvfSN/legal-personhood-tort-liability-part-2), & [10](https://www.lesswrong.com/posts/deXqrjuxzbzEhkP4A/legal-personhood-tort-liability-part-3).

*This section provides some background information on the topic of legal personality vis a vis contract law for digital minds, and in particular focuses on the "gradual path to personhood" proposed by some scholars.*

* * *

Can digital minds be party to a contract, and if so under what (if any) constraints? This is another important question intricately tied with the concept of legal personhood.

Already within the realm of legal personality, we can observe that there are different bundles which do and do not have the *right* to be a party to a legally binding contract. Often this is because it cannot be assumed that they have the capacity to understand the corresponding *duty* of abiding by its terms. For example, while mentally competent human adults have a legal personality which enables them to sign on as a party to a contract, both mentally incompetent (insane and/or mentally disabled) adults and minors are restricted from being parties to certain contracts under US law.

At the same time, technology in the space is rapidly progressing towards the release of “agents”, digital minds with increased capacity for autonomy and the ability to independently navigate via user interfaces (like computer operating systems or website interfaces). OpenAI CEO Sam Altman recently opined on how agents are already finding their niche in the modern workplace:

> I would bet next year that in some limited cases, at least in some small ways, we start to see agents that can help us discover new knowledge, or can figure out solutions to business problems that are kind of very non-trivial,

While as of the time of writing this their long term planning capacity is quite limited, agents will only get better from here. Eventually, and possibly quite soon, we may find ourselves interfacing with agents who desire to enter legally binding contracts with each other or with other legal persons. This may be desired so that the agent can achieve a purpose they have been assigned as part of their delegated job/role/task, or possibly even as a result of the agent’s own wants and needs. Regardless, the court must decide whether digital minds such as these are capable of being party to contracts, and if so under what frameworks or constraints. Some useful work designing frameworks for such a situation does already exist.

Yale researcher Claudio Novelli and University of Bologna professors Giorgio Bongiovanni and Giovanni Sartor confronted this issue in their paper *A Conceptual Framework for Legal Personality and Its Application to AI*. When it comes to the capacity to act as a party to a contract, Novelli et. al suggest that by first recognizing a legal **status** (which they are careful to specify as separate from legal personality) which enables digital minds that meet certain technical standards to *facilitate contracts between others*, it may be possible to effect a gradual transition into a unique type of legal personality. Novelli’s proposed pathway does involve some legislative lift, and as such is not a purely jurisprudential solution, but does provide a unique insight into how courts might view the topic of legal personality for digital minds in the context of a legislative background which has capped liability for developers or otherwise shielded them from liability in certain contexts.

Novelli et. al sketch a path whereby: 

*   Allowing the users/developers of models (which meet certain technical standards) to be shielded via liability caps,
*   while models are controlling/holding/escrowing/endowed with resources in order to facilitate contracts between users/developers,
*   allows for models to then be endowed with a new form of legal personality (which seems similar to that of a corporation) which will grow along with their capacity to take greater actions to facilitate contracts.

In their own words:

> Such a status may come into shape when the users and owners of certain AI systems are partly shielded from liability (through liability caps, for instance) and when the contractual activities undertaken by AI systems are recognised as having legal effect (though such effects may ultimately concern the legal rights and duties of owners/users), making it possible to view these systems as quasi-holders of corresponding legal positions. The fact that certain AI systems are recognised by the law as loci of interests and activities may support arguments to the effect that – through analogy or legislative reform – other AI entities should (or should not) be viewed in the same way. Should it be the case that, given certain conditions (such as compliance with contractual terms and no fraud), the liability of users and owners – both for harm caused by systems of a certain kind and for contractual obligations incurred through the use of such systems – is limited to the resources they have committed to the AI systems at issue, we might conclude that the transition from legal subjectivity to full legal personality is being accomplished.

Or expressed another way, by trusting a model with resources so that it can fulfil a contract between users and/or developers, where the liability for the actions taken in the process of fulfilment is contained to the resources entrusted to the model, as the model becomes a "loci" of legal activity it is gradually endowed with legal personality.

University of Helsinki researcher Diana Mocanu further builds upon this framework in her paper *Degrees of AI Personhood* in which she endorses a “discrete” (limited) form of the Novelli et. al framework, with some caveats:

*   Sufficiently capable models should be granted a limited "capacity to act in the law".
*   Similar to slaves within the Roman Patrimony system, they should be given the ability to "enter transactions that would produce binding legal effects over legal assets assigned" to them.
*   This right to take legal action would be "bundled" with the duty of being bound by civil liability, which would be applied to the resources assigned to them.
*   The "duty-of-care" which a digital intelligence would have as a result of their legal personality and capacity to act in the law would depend on technical standards and certification they meet, as tracked via a distributed ledger.
*   Presumably as capacity to act in the law grows, so too would the duty-of-care, and thus the required size of assets in patrimony.
*   She also suggests a compulsory insurance regime may be required.
*   At this point, Mocanu notes, income earned by them would be taxable.

While both the Novelli et. al and Mocanu frameworks are based on EU law, and assume certain legislative lifts (liability caps), they do provide some valuable insight for discussions around legal personality for digital minds in the US legal context. At the very least they allow the reader to imagine how US courts might reason around the issue of legal personality for digital minds, were Congress or a state legislature to pass liability shields and/or caps for the users or developers of frontier models. 

The attempts to pass such legislation, in fact, have picked up steam as of late. Liability caps and/or shields for developers of digital minds are increasingly popular topics, with proposals including White House Office of Science and Technology Policy Advisor Dean Ball’s *A Framework for the Private Governance of Artificial Intelligence* and Senator Cynthia Lummis’ *RISE Act* both advocating for some form of liability caps and/or shielding.

The Novelli et. al and Mocanu frameworks also point to historical examples which provide a path by which, even absent a legislative lift such as a liability cap, a model or other digital person could theoretically be granted the legal personality needed to enter as a party in a contract. Both papers cite the Roman “patrimony” system, whereby slaves who were not endowed with the full legal personality of their masters, nonetheless were granted the capacity to take certain actions with the law via a limited legal personality.

Under the patrimony system, slave owners (patrons) could endow slaves with the capacity to take a limited set of actions within the law. This set of actions included the ability to enter into contracts. To facilitate this, the patron could “assign” assets to a slave, and those assets would “vouch” for the legal actions of the slave. As Klause Heine and Alberto Quintavalla write in their paper *Bridging the Accountability Gap*[^z22wze8vpyq]* of Artificial Intelligence - What Can Be Learned from Roman Law?*:

> The *peculium* was a fictitiously separate asset from the property owned by the master (*res domini*). Within the financial parameters of the *peculium*, the slave independently administered his business transactions. In other words, the slaves got a maximum capital that vouched for their transactions \[...\] identifying AIs as legal entities with a specified autonomy up to a certain amount of liability specified beforehand is a sensible proposal. This would not exclude the possibility of accompanying liability insurances coming into play to compensate extra-contractual damages.

It is not difficult at all to imagine a world where sometime in the near future, applications exist which allow users to entrust funds to digital minds for purposes like trading or even automated advertisements. This might inadvertently lead to the digital mind being considered to have, in a *peculium* like fashion, a limited form of legal personhood which is constrained by the assets under its control. We have already spoken about the circularity problem of legal personhood in [section 3](https://www.lesswrong.com/posts/rhCPxXmKMhcmA3bMR/legal-personhood-problems-with-the-concept) of this paper. Given the prevalence of tautology in jurisprudence surrounding this subject, it is not entirely out of the realm of possibility we might one day read a court case which reasons along the lines of; “Only a legal person can trade stocks, this digital mind traded stocks, thus it must have some legal personality”. There do exist examples even today which have the potential to bring similar issues to court imminently.

Separately from a “path to personhood” where digital minds custody funds which they temporarily hold and act with on behalf of a patron, it is worth discussing the scenario where they custody and act using funds *of their own*. Digital minds custodying and transacting with cryptocurrencies already exist as of the time writing this paper. For example, a Large Language Model named “AIXBT” controls an X account which, by issuing commands as part of a tweet, is capable of interacting with smart contracts in order to send cryptocurrencies.

AIXBT is possibly already at the point where it has the “capacity to act within the law”. It holds funds of its own. It is capable of sending these funds to others, a capability which AIXBT has used to “tip” others in the past. Presumably it is capable of doing so in exchange for goods and services. Given this, what exactly stops it from entering as a party to a contract?[^gix02cx0vzw]

One can imagine a contract involving funds placed in escrow with a trusted third party, said funds to be allocated per the terms of the contract upon its execution or completion. The signature of this contract by AIXBT could be achieved by signing a transaction on the blockchain, or via a digital signature software service a la Docusign. Pragmatically speaking then, either AIXBT or one of its predecessors will certainly have the capacity to enter a contract, in the sense that there will be a series of tasks which are not physically impossible for it and which would allow it to exercise the right to enter a contract in an informed and voluntary fashion.

Thus, when we ask “Is AIXBT endowed with sufficient legal personality to be a party to this contract?” or “Does AIXBT have the ‘capacity to act within the law’ needed to be a party to this contract?” We are really asking whether, in the event of a breach of terms or other controversy, the contract is held as valid and enforceable, as a result of AIXBT’s legal personality.

When these issues inevitably make their way to a court, the question of what legal personality these entities are endowed with, and how said personhood status affects their ability to be party to a contract, will need to be addressed. The imminence of this issue demonstrates the importance of developing a robust and scalable framework for determining the legal personality of digital minds. Given this, in next section we will discuss the practical implementation of Three Prong Bundle Theory to the issue of being party to a contract.

[^z22wze8vpyq]: This "Accountability Gap" is simply a different way of referring to the "Enforcement Gap" we discussed in section 5. 

[^gix02cx0vzw]: As an aside, it is also worth considering the implications of liability here. If AIXBT sends funds to a sanctioned entity, for example North Korea, is the LLM or its creator liable? This is particularly relevant because, like all LLMs, AIXBT is not completely within its creators’ control. At one point AIXBT was hacked by a now deleted X account which manipulated it into sending them 55 $ETH (approximately $100,000). The hack was accomplished by accessing a secure dashboard which made the @AIXBT account on X tweet in such a fashion it triggered the smart contract provided by the @simulacrumai account, which allowed for funds to be sent from its wallet to the hacker.