Source: Warhammer Fantasy: 4th Edition

Panic Tests (Spells)
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Some spells cause panic tests or psychology tests of one kind or another. These are detailed more fully on the spell cards themselves and in the commentary below. Additionally, any unit that suffers 25% casualties in the magic phase must take a panic test just like a unit suffering 25% casualties from missile weapons in the shooting phase. A unit only has to take one panic test due to casualties per magic phase, even if it is hit several times in succession. If a unit fails its panic test while in hand to hand combat it will flee immediately and is considered to have broken from combat. The enemy may therefore pursue and other friendly units within 12" have to take a panic test on account of friends being broken in hand to hand combat.