SET XACT_ABORT

Specifies whether SQL Server automatically rolls back the current transaction when a Transact-SQL statement raises a run-time error.

When SET XACT_ABORT is ON, if a Transact-SQL statement raises a run-time error, the entire transaction is terminated and rolled back.

When SET XACT_ABORT is OFF, in some cases only the Transact-SQL statement that raised the error is rolled back and the transaction continues processing. Depending upon the severity of the error, the entire transaction may be rolled back even when SET XACT_ABORT is OFF. OFF is the default setting.

Compile errors, such as syntax errors, are not affected by SET XACT_ABORT.

XACT_ABORT must be set ON for data modification statements in an implicit or explicit transaction against most OLE DB providers, including SQL Server. 

The only case where this option is not required is if the provider supports nested transactions.

Example:

SET XACT_ABORT OFF;
GO
BEGIN TRANSACTION;
INSERT INTO t2 VALUES (1);
INSERT INTO t2 VALUES (2); -- Foreign key error.
INSERT INTO t2 VALUES (3);
COMMIT TRANSACTION;
GO
SET XACT_ABORT ON;
GO
BEGIN TRANSACTION;
INSERT INTO t2 VALUES (4);
INSERT INTO t2 VALUES (5); -- Foreign key error.
INSERT INTO t2 VALUES (6);
COMMIT TRANSACTION;
GO