Quote from: bigbox on October 24, 2012, 09:10:54 PM

Quote from: JoelKatz on October 24, 2012, 08:10:14 PM

If you believe the contract implicitly allocates that risk to Patrick, then equitable mistake wouldn't apply.

Patrick explicitly allocated the risk to himself. Thus, equitable mistake doesn't apply.

I read this as allocating the risk that individual loans will default, not the risk that of correlated default. He can't have explicitly allocated a risk he didn't know existed.

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Quote from: PatrickHarnett on April 09, 2012, 10:35:35 PM

I know there are some risks involved and potential to lose serious money on some of the loans I have out in the wild.

This is talking again about the risk of individual loans defaulting, not coordinated default due to common risk.

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Quote from: PatrickHarnett on August 31, 2012, 08:22:43 PM

I... carry the risk from bad loans and the timing of requests.

Again, in context, this referred to the risk that individual loans would default.

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As coinft points out, if the loans had done better than expected the excess profits wouldn't have been equitably split, they would have gone to Patrick.

That's true, but I don't see why that matters. The issue is whether and how they agreed to allocate the risk of coordinated default. I agree the contract allocates any "excess" profit to Patrick. But that says nothing about whether or how it allocates the risk of coordinated default.

It was a common mistaken belief that the loans were not correlated and that there did not exist a common event that would or could cause a significant fraction of loans to default at the same time. The question is whether the contract allocated this specific risk.