In that scenario, every additional click, even if of decreasing marginal utility, is a win for the advertiser and the publisher is making them a favor by sending as much traffic as they can.

For Google AdSense and other programs based on pay-per-click scheme, advertiser pays for each click so worthless clicks do cost them money and benefit the publisher. That's why it's fraud. There is a strong incentive for one side (publisher) to take advantage of the other side (advertiser) and if allowed to exist on scale, would harm the whole marketplace.

The phrasing you used suggest fixed scheme. If it is used in the context of pay-per-click scheme, then yes, it does violate the agreement and I doubt there's any pay-per-click scheme that doesn't ban such behavior.