When Contextual Inference Fails: Cancelability in Interactive Instruction Following

We investigate the separation of literal interpretation from contextual inference in a collaborative block-building task where a builder must resolve underspecified instructions using contextual inferences. Building on an existing two-speaker psycholinguistic paradigm -- which contrasts a pragmatically cooperative speaker with one who is only literally reliable -- we introduce Build What I Mean (BWIM), an interactive benchmark for contextual meaning construction. In BWIM, models must resolve ambiguity by either performing a contextual inference or requesting clarification at a small communication cost. Evaluating several state-of-the-art LLMs, we find a dissociation between judgment and action: while models detect speaker unreliability in explicit confidence ratings, they fail to exploit this information to guide efficient clarification behavior. Instead, we observe suboptimal strategies, such as partner-blind over-clarification and question-averse guessing under uncertainty.