Front Page Titles (by Subject) Chapter 8: Contracts of Hazard - The Principles of Moral and Political Philosophy
The Online Library of Liberty
A project of Liberty Fund, Inc.
Search this Title:
Chapter 8: Contracts of Hazard - William Paley, The Principles of Moral and Political Philosophy 
The Principles of Moral and Political Philosophy, Foreword by D.L. Le Mahieu (Indianapolis: Liberty Fund, 2002).
About Liberty Fund:
Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.
The copyright to this edition, in both print and electronic forms, is held by Liberty Fund, Inc.
Fair use statement:
This material is put online to further the educational goals of Liberty Fund, Inc. Unless otherwise stated in the Copyright Information section above, this material may be used freely for educational and academic purposes. It may not be used in any way for profit.
Contracts of Hazard
By Contracts of Hazard, I mean gaming and insurance.
What some say of this kind of contracts, “that one side ought not to have any advantage over the other,” is neither practicable nor true. It is not practicable; for that perfect equality of skill and judgement, which this rule requires, is seldom to be met with. I might not have it in my power to play with fairness a game at cards, billiards, or tennis; lay a wager at a horse-race; or underwrite a policy of insurance, once in a twelve-month, if I must wait till I meet with a person, whose art, skill, and judgement, in these matters, is neither greater nor less than my own. Nor is this equality requisite to the justice of the contract. One party may give to the other the whole of the stake, if he please, and the other party may justly accept it, if it be given him; much more therefore may one give to the other a part of the stake; or, what is exactly the same thing, an advantage in the chance of winning the whole.
The proper restriction is, that neither side have an advantage by means of which the other is not aware; for this is an advantage taken, without being given. Although the event be still an uncertainty, your advantage in the chance has a certain value; and so much of the stake, as that value amounts to, is taken from your adversary without his knowledge, and therefore without his consent. If I sit down to a game at whist, and have an advantage over the adversary, by means of a better memory, closer attention, or a superior knowledge of the rules and chances of the game, the advantage is fair; because it is obtained by means of which the adversary is aware: for he is aware, when he sits down with me, that I shall exert the skill that I possess to the utmost. But if I gain an advantage by packing the cards, glancing my eye into the adversaries’ hands, or by concerted signals with my partner, it is a dishonest advantage; because it depends upon means which the adversary never suspects that I make use of.
The same distinction holds of all contracts into which chance enters. If I lay a wager at a horse-race, founded upon the conjecture I form from the appearance, and character, and breed, of the horses, I am justly entitled to any advantage which my judgment gives me: but, if I carry on a clandestine correspondence with the jockeys, and find out from them, that a trial has been actually made, or that it is settled beforehand which horse shall win the race; all such information is so much fraud, because derived from sources which the other did not suspect, when he proposed or accepted the wager.
In speculations in trade, or in the stocks, if I exercise my judgement upon the general aspect and prospect of public affairs, and deal with a person who conducts himself by the same sort of judgement; the contract has all the equality in it which is necessary: but if I have access to secrets of state at home, or private advice of some decisive measure or event abroad, I cannot avail myself of these advantages with justice, because they are excluded by the contract, which proceeded upon the supposition that I had no such advantage.
In insurances, in which the underwriter computes his risk entirely from the account given by the person insured, it is absolutely necessary to the justice and validity of the contract, that this account be exact and complete.