Quote from: JoelKatz on October 28, 2012, 02:27:00 AM

Quote from: Bjork on October 28, 2012, 01:22:33 AM

I don't believe Patrick ever explicitly stated that these funds were vulnerable to any risks from the depositors perspective. In most countries any ambiguities in contracts favor the person who did not write the contract, I.E. depositors. He would have needed to explicitly state that these funds were vulnerable and he did not.

I'm not arguing that there's an ambiguity in the contract. I'm arguing that there's a common mistake underlying the contract.

The analogy would be two people who both believe that a ship sank in a particular place who contract to have one party recover the ship for a fixed fee. If it turns out that they were both incorrect and the ship was actually someplace else that is either more expensive or less expensive to recover, the disadvantaged party could not be equitably required to comply with the terms of the contract. The exception, of course, would be if the contract explicitly assigned this risk to one party or the other. The failure to assign this risk doesn't make the contract ambiguous, it just doesn't address this possibility because neither party to the contract considered it likely.

In this case, the common mistake was the belief that the loans were not subject to significant correlated risk. The contract doesn't appear to assign this risk to either party. It's not that it's ambiguous about who bears this risk, it simply didn't include assigning that risk inside its scope because neither party considered that risk likely.

What is the correlated risk you are talking about is it GLSBE? If so why would people borrow money at a 2% compounding interest rate to invest in flakey unregulated businesses on there when most of them yielded less than that and how is that the depositors fault?