Our wizard casts Tiny Hut:
Nine creatures of Medium size or smaller can fit inside the dome with you. The spell fails if its area includes a larger creature or more than nine creatures.
My druid is a humanoid when the dome appears around him, but then shapes into a Dire Wolf. He's now a large creature, but wasn't when Tiny Hut had been cast. Does the hut stay or disappear? It's unclear to us whether the "spell failing" refers to the spell being cast or being active?
Related:
The common phrasing
the spell fails
refers to a spell's casting. For example, Counterspell reads:
You attempt to interrupt a creature in the process of casting a spell. If the creature is casting a spell of 3rd level or lower, its spell fails and has no effect. If it is casting a spell of 4th level or higher, make an ability check using your spellcasting ability. The DC equals 10 + the spell's level. On a success, the creature's spell fails and has no effect.
(emphasis mine), Whereas Dispel Magic reads:
Choose one creature, object, or magical effect within range. Any spell of 3rd level or lower on the target ends. For each spell of 4th level or higher on the target, make an ability check using your spellcasting ability. The DC equals 10 + the spell's level. On a successful check, the spell ends.
(emphasis mine). Once a spell is successfully cast in 5e, it's effect doesn't fail; it ends.
This wording is consistent throughout the rules as well. Some spells state circumstances in which they fail (i.e their effects do not take place), and many somehow state circumstances in which their effects end, either through their Duration or explicitly, in the spell effect's description.
A simple example is Call Lightning and the concentration rules (emphasises are mine):
Call Lightning
3rd level Conjuration
Casting time: 1 Action
Range: 120 feet
Components: V, S
Duration: Concentration, up to 10 minutes
A storm cloud appears in the shape of a cylinder that is 10 feet tall with a 60-foot radius, centered on a point you can see within range directly above you. The spell fails if you can't see a point in the air where the storm cloud could appear (for example, if you are in a room that can't accommodate the cloud).
Concentration
Some spells require you to maintain concentration in order to keep their magic active. If you lose concentration, such a spell ends.
The druid is not squeezed by the tiny hut. Therefore, the Dire Wolfed Druid might poke out of the sphere if there is not enough space for it, making him vulnerable to spells and attacks (albeit with some cover).
"The spell fails" really isn't all that clear as to whether it only applies during casting or if it applies whenever something triggers the failure. Because of that, it really becomes a DM decision as to what will happen at the table.
As other answers have stated, there are some ways to look at this with other spells, but none of those fully support a single direction for the answer.
You can look at spell failure as a casting issue only. In that case, then anything that makes a currently valid spell invalid would no longer matter.
But that's clearly not always the case. Targets can become invalid if that is so ruled at the table. Invalid targets are an optional rule with Xanathar's, but the idea remains that clearly a spell and target can become invalid and we have to figure out what to do.
Given that the spell has language dictating how many and of what size can creature can be in the hut, it's not unreasonable to rule the spell as invalid if creatures of those numbers or size appear in the hut.
Ultimately, it's up to the DM and table to determine if this makes the spell more powerful using a loophole to bring things in that normally couldn't, or if they want to rule it invalid, or just tell the players they can't do it before it even happens and spells are wasted. Or opt to let it work!
The spell fails if its area includes a larger creature or more than nine creatures.
There is nothing in this sentence to suggest it only applies when the spell is cast rather than throughout its duration. So, if the condition is met at any time, the consequence happens - the spell fails.
