Contractual liability refers to the legal responsibility that arises when one party fails to fulfill the terms of a contract. This can occur in various agreements, such as business contracts, leases, or service agreements. When a party does not meet their obligations, they may be required to compensate the other party for any resulting damages or losses. In many cases, contractual liability is defined within the contract itself, outlining the specific responsibilities and potential penalties for non-compliance. Understanding these terms is crucial for both parties to ensure they are aware of their rights and obligations, helping to prevent disputes and legal issues.