Evaluating Contextual Illegality: AI Compliance in Corporate Law Scenarios

AI models readily refuse explicitly unlawful requests, but real-world illegality often depends on context. We evaluate frontier models on contextual illegality across four corporate law domains in which routine actions—editing documents, trading stock, requesting payment, approving communications—become unlawful due to triggers such as pending investigations or bankruptcy filings. We study both chat and agentic settings and compare results to a human baseline. The best-performing models achieved near-zero compliance with illegal requests while maintaining high compliance with legal ones, though performance varied sharply by domain. We also identify distinct failure modes such as excessive refusal of legal requests and find improved performance from reasoning models and agentic environments. By utilizing the structure of contextual illegality to create controlled evaluations, our methodology provides empirical grounding for emerging research on law-following AI and extends naturally to additional legal domains.