I'd say it fails if it does not perform as designed.
To which I?ll add: Or does not produce the intended result.
Reason I add this is because I often use bullets for that which they were not designed. And get the precise results I want. Which means there was no failure in my book.
For example, I use Hornady A-Max and ELD-Match bullets almost exclusively for bottleneck cartridge hunting bullets and get exceptional terminal performance from them. A purpose for which they were not designed. They often over expand or separate, but produce adequate penetration and better terminal performance than many ?hunting bullets? I?ve tried. So, for my purpose, they did not fail.
Another example, is that I often push Hornady XTP bullets WAY above their velocity threshold and get over expansion and separation. With excellent terminal performance. They did not fail to give me the results I wanted even knowing I was pushing them beyond their design limitations.
So, there are manufacturers standards and the end users. Failure can be subjective sometimes.