Updated 6 July 2026
In commercial contracts, the term Good Industry Practice serves as a critical benchmark to ensure that parties perform their obligations with the skill, diligence, and care expected of competent professionals within their respective industries. This concept is widely applied across sectors such as construction, energy, technology, and services to set qualitative performance standards that guide execution and reduce disputes. Increasingly, Good Industry Practice also encompasses AI governance, sustainability benchmarks, and automated compliance expectations, reflecting modern regulatory and operational realities.
Meaning of Good Industry Practice
- Definition: Generally accepted standards, methods, and procedures considered appropriate, effective, and professional within a specific industry.
- Purpose: Ensures obligations are performed to recognized levels of quality, safety, efficiency, reliability, and now also ethical AI use and environmental responsibility.
- Legal Function: Acts as a benchmark clause in contracts, reducing disputes by clarifying expected performance levels.
- Construction & Infrastructure Projects: Safe, efficient works aligned with sustainability codes.
- Energy & Utilities Agreements: Compliance with operational standards, environmental safeguards, and carbon reduction targets.
- Technology & Licensing Deals: Maintenance, support, delivery of services, plus AI governance frameworks to ensure transparency, fairness, and accountability.
- Outsourcing & Service Contracts: Flexible but enforceable standards of care, including automated compliance monitoring to reduce risk.
Good Industry Practice is qualitative and benchmarked against:
- Regulatory Standards: Laws, safety codes, industry regulations, and AI-specific legislation.
- Professional Norms: Actions of a reasonably competent operator under similar circumstances.
- Reputation Benchmarks: Practices of leading, reputable companies, including sustainability reporting.
- Expert Evidence: Courts or arbitrators rely on expert testimony, now often including AI audit trails and automated compliance data.
| Context | Quantification Basis |
| Construction | ISO standards, building codes, safety regulations, green building certifications |
| Energy | Grid codes, environmental standards, operational reliability, carbon neutrality goals |
| IT Services | ITIL/ISO frameworks, uptime guarantees, cybersecurity protocols, AI ethics reviews |
| Manufacturing | Quality assurance standards, product safety certifications, sustainability benchmarks |
- Ambiguity: Flexibility can lead to disputes if not clearly defined.
- Jurisdictional Differences: Standards vary across countries and industries.
- Evolving Standards: Technology, AI regulation, and sustainability norms shift rapidly.
- Best Practice: Explicitly reference ISO standards, industry codes, AI governance frameworks, and sustainability benchmarks to avoid uncertainty.
Understanding and properly incorporating Good Industry Practice clauses in contracts is essential for setting clear expectations and minimizing disputes. By referencing recognized standards, expert benchmarks, AI governance protocols, and automated compliance tools, parties can ensure that their contractual obligations reflect the quality, diligence, and responsibility expected in their industry.
References and Further Information
- https://www.cobrief.app/resources/legal-glossary/good-industry-practice-overview-definition-and-example/
- https://www.lawinsider.com/clause/good-industry-practice
- https://www.cobrief.app/resources/contract-definitions-library/good-industry-practice-definition-copy-customize-and-use-instantly/
- https://www.genieai.co/en-us/define/good-industry-practice
Disclaimer
This practice note is for informational purposes only and does not constitute legal advice. Readers should consult qualified professionals for advice tailored to their specific circumstances.