Outlook for Mac Office 365 version 15.25 (160817) - Office 365 licensing.
Seems after an update Outlook is no longer able to send any messages. They all get saved to the drafts folder after the above subject message is displayed.
There is nothing in an outbox, all in drafts. Receiving messages works as per normal.
I saw a bunch of people complaining about this after the update on Microsoft forums but no solution that I could see. Hosted Exchange.