Start considering contracts as part of your compliance infrastructure

As artificial intelligence (AI) systems moved from experimentation into core business operations, organizations were expected to demonstrate control, accountability, and good-faith compliance even as formal regulatory benchmarks remained incomplete, fragmented, or in flux. Waiting for perfect clarity was not an option. Enforcement risk existed regardless of regulatory maturity.

Enterprises responded pragmatically. Contracts became one of the few mechanisms available for operationalizing compliance expectations, translating abstract regulatory principles into inspectable, enforceable obligations.

In effect, contracts began functioning as compliance infrastructure.

When regulation lags, compliance still operates

Compliance programs are built to function under uncertainty. Rarely do organizations enjoy complete regulatory clarity before controls must be designed, implemented, and documented. AI amplified this challenge by introducing dynamic behavior, evolving outputs, and cross-jurisdictional exposure.

During this period of regulatory ambiguity, risk did not recede. It increased. Without clear external benchmarks, organizations faced heightened scrutiny over how they interpreted obligations and operationalized safeguards.

Contracts stepped into that gap. They became the place where enterprises articulated how compliance would work in practice, not in theory.

From aspirational language to operational commitments

Historically, compliance-related contract language relied heavily on aspirational representations. Parties asserted compliance with applicable law, adherence to internal policies, and maintenance of reasonable safeguards.

As AI-related risk intensified, those assurances were no longer sufficient.

Contracts increasingly required operational specificity. This included defined governance roles, documented review cycles, incident notification thresholds, and audit-triggering events tied to system behavior rather than breach alone. Representations became tied to documented processes. Compliance obligations were linked to governance structures, monitoring activities, and review mechanisms. Audit rights expanded in scope and trigger conditions.

The shift was not cosmetic. It reflected a deeper change in how compliance was demonstrated. Assertions gave way to evidence.

In the absence of standardized metrics, the ability to produce documentation became the practical definition of compliance.

Audit rights as compliance controls

Audit provisions have long existed in commercial agreements, often treated as backstop enforcement tools rather than active compliance mechanisms. During this period, their role changed.

As insurance coverage narrowed and indemnities compressed, audit and verification rights became central to compliance posture. Organizations sought not just remedies after failure, but visibility into how systems were governed on an ongoing basis.

Importantly, these audit rights did not need to be exercised frequently to function as controls. Their presence shaped behavior. They clarified expectations. They established accountability pathways.

In this way, contracts began embedding compliance controls directly into commercial relationships.

Governance moves into the core agreement

Another notable development was the repositioning of governance language. Previously, governance provisions often appeared in ancillary documents or policy references that received limited attention during negotiation.

As AI risk intensified, governance obligations moved closer to the core of agreements. Oversight mechanisms, escalation paths, and documentation requirements became material terms. Cross-references between data protection provisions, AI-specific clauses, and core obligations increased.

This shift signaled a broader recognition: Governance was no longer an implementation detail. It was a primary compliance concern.

For compliance teams, this meant that contract review could no longer be treated as downstream validation or a purely legal exercise. Contract language increasingly determined what controls existed, what evidence could be produced, and how readiness would be evaluated in the event of inquiry.

Contracts as records of compliance judgment

Contracts also began functioning as records of organizational judgment at the time decisions were made.

In environments where rules are incomplete, regulators often examine not only outcomes but intent, diligence, and reasonableness. Contract language plays a critical role in that assessment.

Provisions addressing monitoring, documentation, and escalation communicate how an organization understood its obligations at the time of signing. Silence, ambiguity, or overreliance on generic assurances can be interpreted as a lack of foresight or control.

In 2025, this reality became more visible. Contracts were no longer passive repositories of risk allocation. They were evidence of how compliance decisions were made.

What this means for compliance and legal leaders

For compliance leaders, the implications are significant.

Contracts can no longer be viewed as peripheral to compliance architecture. They are increasingly central to how controls are defined, implemented, and demonstrated. Drafting choices affect not just commercial outcomes, but compliance posture and enforcement readiness.

This does not mean contracts should replace compliance programs. It means they must align with them. Contractual obligations should reflect how compliance actually operates, not how it is described in policy documents.

The most effective approaches observed in 2025 treated contracts as one layer in a broader control framework, reinforcing internal processes rather than standing apart from them.

Compliance in a world of evolving systems

AI did not create the need for operational compliance. It exposed the limits of purely aspirational approaches.

As systems act continuously and obligations evolve, compliance must be demonstrable, not assumed. Contracts have become one of the few places where expectations, controls, and accountability can be articulated with precision across organizational boundaries.

The lesson from 2025, now playing out in 2026 and beyond, is not that contracts replaced regulation. It is that they became a critical layer of compliance infrastructure while regulatory frameworks continued to evolve.

For organizations deploying AI at scale, contracts now help determine not only what is promised, but what can be shown when oversight arrives. In practice, they increasingly define the evidence trail regulators will expect to see.