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Failure to pay is the classic event of default in a financial contract. There is no more profound indication that you may be unable to honour your obligations to pay a sum of money that the fact you have actually not done so. Almost all close-outs will derive from some kind of failure to pay or insolvency — but don’t let that knowledge stop your credit department insisting on a four month negotiation about ratings downgrade triggers.
Contrast with a failure to deliver which in some contracts[1] is tantamount in outrage to a failure to pay, but in others is just one of those things that we accept, sort out, and move on with. For example, stock lending transactions, where a failure to lend Securities, or return Securities or Collateral, might be just one of those things: the result of ordinary market fluctuations, where settlement failures are common, and one often relies on someone else — or a chain of someone elses — settling the necessary Securities into you so you can settle them to your loan counterparty.
See also