An AI-output incident needs a record of the input, output, model version, retrieved material, permissions and human actions involved. Contain further exposure, assess affected persons and contractual commitments, and identify applicable reporting duties. An inaccurate output is not automatically a reportable personal-data breach; the classification depends on the facts.
The business situation
An assistant sends a customer an incorrect contractual assurance based on an outdated document. The business corrects the message but the same document remains available to the assistant. The immediate error is addressed; the mechanism that produced it is still active.
AI governance starts with a use case and a responsible legal entity. A model is not itself a Data Fiduciary. The organisation determining the purpose and means of personal-data processing may be one. Contract, intellectual-property, consumer, employment and sector rules can apply alongside data-protection law; the relevant obligations depend on the deployment.
What needs examining
01. Preserve enough context to understand the event
Capture the available input and output, tool actions, retrieval sources and relevant configuration without collecting unrelated sensitive information. Record what the user saw and what any reviewer approved. Distinguish an incorrect source document from a retrieval error, model fabrication or unauthorised external action. Different causes require different legal and operational responses.
02. Assess the legal consequence separately from the technical fault
Consider contractual representations, confidentiality, personal-data disclosure, intellectual-property use and sector obligations. The fact that software generated a statement does not by itself remove the organisation's responsibility. Equally, every inaccurate draft does not trigger every incident regime. Record the applicable tests and the evidence supporting each conclusion.
03. Close the recurrence route
Correction should address the source, permissions, workflow or approval boundary that contributed to the incident. Test the revised process against the known failure and closely related scenarios. Keep any customer correction consistent with the facts. Preserve the distinction between internal remedial analysis and communications that create a new external commitment.
Law, contract and recommended practice
Applicable Indian statutes and sector directions are mandatory where their scope is met. NIST AI RMF is a voluntary governance framework, unless particular commitments become binding through a contract or another applicable requirement. Its GOVERN, MAP, MEASURE and MANAGE functions can organise evidence without creating a new Indian legal obligation.
Connect the control to the evidence
Use this table to scope the review. The legal basis and the practical control are identified separately.
| Obligation or objective | Practical control | Evidence to retain |
|---|---|---|
| Law, where applicable Assess actual disclosure or other legal impact | Incident classification by regime | Reasoned legal decision record |
| Contractual control Address representations and service duties | Review affected terms and corrective communication | Terms, correspondence and response history |
| Recommended practice Prevent the same failure recurring | Root-cause correction and regression check | Test result and approved release |
Records to prepare
Bring the complete, current record to the review. Preserve earlier versions where a change or disputed event makes them relevant.
Common questions
Is a hallucination automatically a data breach?
No. Determine whether personal data was involved and whether the facts meet the relevant legal definition. Other contractual, consumer or sector consequences may arise even where there is no personal-data breach.
Should the team delete the incorrect output immediately?
Contain further use while preserving an appropriate evidentiary record. Uncontrolled deletion may prevent investigation or impair a legal response. Access and retention should be limited to the legitimate incident purpose.
Treat closure as a verified change to the failure mechanism, supported by a legal decision record. A corrected message alone may leave the underlying exposure unresolved.
Legislation & official resources
These references identify the governing frameworks. Confirm the current text, relevant amendments and applicable judicial position for the matter.
- NIST AI Risk Management FrameworkNational Institute of Standards and Technology · Voluntary governance framework. It does not, by itself, create an Indian statutory duty.
- Indian Contract Act, 1872Government of Uttar Pradesh · Commercial Tax Department · Government-hosted statutory reference. Read with applicable amendments, special law and judicial interpretation.
- Digital Personal Data Protection frameworkMinistry of Electronics and Information Technology · Official framework resource. Apply the relevant Act, Rules and commencement notifications together.
- CERT-In Directions under section 70B(6), 28 April 2022Indian Computer Emergency Response Team · Assess covered entities, incident categories and the applicable reporting trigger independently of other regimes.
This note is general information. The scenario is hypothetical and does not describe a client matter. The legal result depends on the facts, documents, jurisdiction and operative law. No individual lawyer review is represented by the preparation date.
Explore the AMLEGALS ai governance practice