4 ms·

I don't think this is a case of the contract containing "something in the fine print that is clearly against the intent behind the contract" though. The underwr

I don't think this is a case of the contract containing "something in the fine print that is clearly against the intent behind the contract" though. The underwriters may not have correctly calculated the exposure of the contract, but they knew what they were selling. From the article: > But Max-Hervé George didn't mess with any expectations. Aviva had to expect exactly this. This is nuts independent of actuarial assumptions. Aviva knew it was offering an arbitrage at its expense. The name of the thing is "Fixed Price Arbitrage Life Insurance Contract." That just means, "We have made a horrible mistake, would you like to buy it?" The answer is yes, all day long.

Hermel 10y ago
> had to expect But apparently did not. The question is also: what did Max-Hervé expect? If he knew that the insurance could not have meant the contract the way they wrote it, it is morally (and maybe also legally) wrong to exploit their mistake (unless you live in Anglo-Saxon capitalism, where everyone is expected to screw everyone else given the opportunity).
- morgante 10y ago
  > If he knew that the insurance could not have meant the contract the way they wrote it, it is morally (and maybe also legally) wrong to exploit their mistake Why can you assume that? The contract is written clearly and specifically calls itself an arbitrage contract. Was it unethical to exploit the fact that the mythical king didn't bother to calculate exponents? The request itself was stated clearly.
  - Hermel 10y ago
    > Was it unethical to exploit the fact that the mythical king didn't bother to calculate exponents? Yes, it is clearly unethical to enter into a contract with someone when you know that the other person would never agree if he actually understood what the contract says. Also, in many jurisdictions, such a contract would be void.
    - morgante 10y ago
      The law does not protect you from stupidity, just manipulation or deception. In my view, neither does morality. A fool deserves to be separated from his money. If I offer to sell you 10 nickels for a dollar, it's your own damn fault if you agree.
      - Hermel 10y ago
        Actually, the law often protects you from your own stupidity. Btw, if you think that the words and the signatures on the paper are the contract, you are wrong. The contract is what you agreed to, and if there is no agreement, there is no contract. Here is an example that I actually experienced: we proposed a deal to person A. That person agreed and sent the signed contract back. We then also put our signatures onto the contract and put it into a drawer. However, we unfortunately did not notify A that we signed the contract as well, rendering the contract void. I.e.: in my jurisdiction (and many others in Europe), it does not suffice that everyone signed a contract, one also needs to ensure that everyone knows that everyone signed the contract. Otherwise, it is invalid because there was no agreement everyone knew about.
        morgante 10y ago
        I'm well aware of how contract law works. The law requires that knowingly enter a contract and understand its terms. If this contract had been written such that they didn't realize he could reallocate investments after the fact, then you might have a point. The law does not protect you from making bad decisions and entering contracts you probably shouldn't, provided you understand the contracts themselves. That would mean a huge majority of contracts are invalid because people frequently and routinely enter contracts which are inadvisable. (For example, subprime loans.) Not understanding a contract and not thinking through the implications of said contract are completely different things.

Hermel 10y ago

> had to expect But apparently did not. The question is also: what did Max-Hervé expect? If he knew that the insurance could not have meant the contract the way they wrote it, it is morally (and maybe also legally) wrong to exploit their mistake (unless you live in Anglo-Saxon capitalism, where everyone is expected to screw everyone else given the opportunity).

morgante 10y ago
> If he knew that the insurance could not have meant the contract the way they wrote it, it is morally (and maybe also legally) wrong to exploit their mistake Why can you assume that? The contract is written clearly and specifically calls itself an arbitrage contract. Was it unethical to exploit the fact that the mythical king didn't bother to calculate exponents? The request itself was stated clearly.
- Hermel 10y ago
  > Was it unethical to exploit the fact that the mythical king didn't bother to calculate exponents? Yes, it is clearly unethical to enter into a contract with someone when you know that the other person would never agree if he actually understood what the contract says. Also, in many jurisdictions, such a contract would be void.
  - morgante 10y ago
    The law does not protect you from stupidity, just manipulation or deception. In my view, neither does morality. A fool deserves to be separated from his money. If I offer to sell you 10 nickels for a dollar, it's your own damn fault if you agree.
    - Hermel 10y ago
      Actually, the law often protects you from your own stupidity. Btw, if you think that the words and the signatures on the paper are the contract, you are wrong. The contract is what you agreed to, and if there is no agreement, there is no contract. Here is an example that I actually experienced: we proposed a deal to person A. That person agreed and sent the signed contract back. We then also put our signatures onto the contract and put it into a drawer. However, we unfortunately did not notify A that we signed the contract as well, rendering the contract void. I.e.: in my jurisdiction (and many others in Europe), it does not suffice that everyone signed a contract, one also needs to ensure that everyone knows that everyone signed the contract. Otherwise, it is invalid because there was no agreement everyone knew about.
      - morgante 10y ago
        I'm well aware of how contract law works. The law requires that knowingly enter a contract and understand its terms. If this contract had been written such that they didn't realize he could reallocate investments after the fact, then you might have a point. The law does not protect you from making bad decisions and entering contracts you probably shouldn't, provided you understand the contracts themselves. That would mean a huge majority of contracts are invalid because people frequently and routinely enter contracts which are inadvisable. (For example, subprime loans.) Not understanding a contract and not thinking through the implications of said contract are completely different things.