Chapter IV: On Aleatory Contracts

St. Alphonsus, III, 869-917; ed. G., II, p. 236; H. Ap., tr. X, n. 214; Lugo, disp. 31; Lehmkuhl, I, 1354; Aertnys, tr. VII, n. 511; Huppert, Lebensversicherungsvertrag; Tanquerey, II, p. 527; Genicot, I, n. 656; Pruner, n. 762; Schindler, II, p. 686.

Those contracts are called aleatory whose effects, both as regards gain and as regards loss, depend on an uncertain event. Contracts of this kind are (besides life census, concerning which n. 1146, 3) insurance, betting, lottery, and game.

1161. DEFINITION. Insurance is a contract by which someone takes upon himself the peril of another's thing or person, obliging himself, for a certain price (prime), to compensate it if it perishes or suffers damage.

DIVISION. Insurance, by reason of the different peril, can become manifold. Thus there are given insurances against shipwrecks, fire, hail; indeed there is given insurance of life, that is, for support to be paid to children or heirs, if such a person dies beforehand.

Note. 1. In our times, by the help of statistical art, the likelihood of peril could be determined much more accurately, from which it has happened that insurance has become less aleatory. 2. Although this contract is of itself consensual, nevertheless it is not rendered altogether firm except after the acceptance of the written document subscribed by the society (police). 3. The insurer in no way intends to compensate that damage which the insured (or his family) has brought upon the thing.

1162. PRINCIPLES. I. The contract of insurance is null and unjust if, on the part of the insured thing, probable peril is lacking. This is plain from the definition (III, 911).

Hence: 1. If the insurer is certain that the thing is safe, for example a ship in port, he asks a price inequitably, and he is held to restore what has been accepted. 2. If someone has sold an insured thing, and before the fire it has already been handed over to the buyer, the insured cannot receive the whole compensation (Lehmkuhl, I, 1356). See also the civil laws.⁰²

II. The contract of insurance is unjust if, on the part of the insured manifesting the perils, there is present an efficaciously damaging error. The reason is that it belongs to the essence of insurance that the price be proportioned to the peril. For the price and compensation are determined in proportion to the peril. Therefore sincerity in declaring the peril belongs to the essence of the contract.

We have said: 1. If an error is present. Error, although admitted in good faith, does not confer validity on the contract; error committed in bad faith (provided, as we shall soon say, that it is concerning a notable thing) obliges also to repairing damages.

2. An efficaciously damaging error, that is, having for its object a notable defect, from which it happens that the peril of the thing or person is truly increased.

But it is the same whether this defect already existed at that time when the contract was perfected, or only supervened afterward.

As regards errors concerning defects of lesser moment, we do not judge that the contract by that very fact becomes null if the insured was silent about them, provided the proportion between peril, price, and compensation, notwithstanding malicious reticence, still morally endures.⁰³ This is to be affirmed the more because Authors are not lacking who think that even then the contract is valid and just if in good faith a notable defect was not manifested (provided the insured of himself increases what he owes, or accepts less); and that to insurers there is conferred only the faculty of not paying the premiums (Lehmkuhl, I, 1355). When the insurer protests, certainly one must stand by the sentence of the judge.

III. The contract of insurance is unjust if the insurer is unequal to paying the promised compensation. This is required from the nature of the contract. Therefore the insuring society cannot retain prices if the number of the insured becomes so great that, if the peril suddenly rushes in, it cannot pay.

But if it is able to compensate only part of the damage, some say the contract is invalid by that very fact; others think that the society can retain the part of the price which corresponds to the quantity of security which in reality it furnished.

IV. Officials of an insuring society are subject to the same laws to which mandataries are subject (cf. 1090). It is plain of itself, whatever some insuring societies may say. Therefore those things which officials do bind the society itself, provided they have acted within the limits of their mandate.

Note. An insuring society of itself, by force of the statutes, is held to compensate damages which proceed from the malice of outsiders. From this it follows that unjust damaging persons must repair this compensation to the society, because the society succeeds into the rights of the insured when it pays the compensation. Concerning the mode of restoring, see n. 1015.

For practice it must be noted that in certain regions the insuring society, foreseeing that it will suffer damages maliciously from many insured persons, increases the prices to be paid by all so much that, in the better way in which it can be done, it renders itself unharmed. Some think that in these circumstances malevolent damaging persons are held to no restitution. Yet this does not seem proven to us. For, granted that the contract is firm from the beginning, the damaging person is always held toward the society, yet with those things subtracted in which the society has been made richer beyond what is equitable, by demanding greater prices.

DEFINITION. Betting (pari) is a contract by which two or more, contending concerning the truth or concerning the event of some thing, mutually pledge something to themselves, so that it may belong to him who shall have attained the truth.⁰⁴

1163. PRINCIPLES. I. Betting is, per se, licit. For by reason of itself it is an indifferent thing. It is illicit if it is made under sinful conditions, for example if someone bets that he will commit some sin, or that he will drink wine in the greatest quantity; otherwise, if someone bets that he will not sin.

In practice, bets rarely can be excused from venial sin, on account of defect of an honorable motive in the bettors, who generally are led rather by an end of vanity and prodigality. Yet an illicit bet does not impose the burden of restitution, unless it was also unjust (III, 869 ff.).

1164. II. That betting may be just, equality must be observed. It is required namely that the prize which is pledged be equal (unless the other party consents to inequality), and that the event be doubtful to both.

IT IS ASKED. Whether a bet has force if someone manifests that he knows the matter certainly, and notwithstanding this, the other perseveres in the bet?

Resp. The first opinion affirms that it has force, because the other ought to impute the detriment to his own pertinacity. The second, much more probable opinion denies, because the other does not bet except from the erroneous persuasion that the one asserting that he knows the matter does not have the certainty which he says (Lugo, disp. 31, n. 81). Yet the contract would have force if he who from the beginning seemed certain about some matter afterward, with the other contradicting and wishing to bet, began to doubt; because thus equality returns; or if the other already begins to give faith to the one asserting that he knows the matter certainly, because then he yields to his right (Lugo, l. c., n. 79). Cf. St. Alph., III, 878.

1165. DEFINITION. Lottery, or gainful sortition, is a contract by which several place a certain sum of money in common, and then draw by lot who is to receive the object of the lottery.

PRINCIPLE. Lottery is a licit contract, provided the due conditions are present. For it can be considered either as a simple game, or as the purchase of an uncertain thing; but each contract is altogether licit.

The required conditions are: 1. that there be no fraud in drawing out the tickets, nor in paying the prize which has fallen by lot; 2. that the owner of the lottery not exceed in gain, nor morally gain more than if by another licit contract he expended his money, or distributed his wares.

To some Authors this rule appears more severe than equitable; because, even in a game, he to whom chance favors justly gains more than he could have gained by negotiation. But all agree in this, that the gain can be greater if the lottery has been instituted for a good work or for public utility; for those participating in the lottery are judged to consent to this. See Gury, I, 943; Genicot, I, 663; Scavini, II, 583, where he treats of the dangers of royal Sortition, commonly regio Lotto.

1166. DEFINITION. Game, insofar as it regards justice, is a contract by which the players agree among themselves that what each has deposited should yield to the victor.⁰⁵

DIVISION. Game is threefold: 1. industrial, which is ruled by industry alone, as a ball game; 2. aleatory, which chiefly depends on chance, as a game of dice; 3. mixed, in which industry concurs with chance, as a game of cards, at least for the most part.

1167. PRINCIPLES. I. Game is, per se, honorable and licit. For it is a delight ordered to repairing the powers of the soul (cf. n. 834). Nor can it become illicit on account of the prize constituted; "because, just as anyone who is owner of his own thing can donate it to another absolutely, so also under some condition, whether it is fortuitous or depends on industry" (III, 871).

It is said: it is licit per se; for, per accidens, it can become illicit in various ways, and indeed: 1. by reason of excessive affection, if the player explicitly proposes to himself rather to sin than to leave the game; 2. by reason of the danger of sinning, if the game would be an occasion of quarrels, or of uttering blasphemies, dishonorable words, etc.; 3. by reason of the sum of money exposed,⁰¹ if it is not proportioned to the powers of the players, so that children, creditors, the poor, etc., suffer detriment; 4. by reason of circumstances of time, place, person, etc., if they are not fitting; 5. by reason of positive prohibition: thus, for example, games of dice are forbidden to clerics (cf. n. 2231).

1168. II. For the validity of game, diverse conditions are required. When these are lacking, justice is injured. And indeed:

1. The things exposed to the game must be proper to the players, and in their ownership, and in their free faculty of disposing.

Hence: a) If someone plays (even in a licit game) with a minor, a wife, or others who do not have free administration of goods, he cannot retain the gain, unless it is a question of moderate sums which are judged to be altogether permitted to their disposition. b) If someone plays with another's money, probably he must restore the gain. For the contract was null from the beginning, from the fact that money was exposed which neither of the players could acquire (III, 875; Lugo, disp. 31, n. 17). Except if the money of a deposit had been exposed, with at least the presumed consent of the depositor. Nevertheless, the contrary opinion is also probable, which attributes gain of this kind, as the fruit of his industry, to the victor, provided that, in case he is conquered, he can return from his own goods.

2. The players must consent freely to the game.

Whence if someone from among the players is not master of himself, so that he cannot furnish full consent, the contract is not valid and the gain must be restored. Nevertheless, if someone injuriously compels another to play, the contract per se becomes valid, but rescindable at the judgment of him who suffered fear (III, 880).

3. The players must not use unjust frauds.

Therefore the player who marks or changes cards, or appoints someone by whom he may be warned, is held to restore the gain, and also as much as the hope of gaining was worth to the other. But each one licitly uses the stratagems which the rules of the game and custom bear, for example he looks at the cards which the other does not hide well, or distinguishes cards from some accidental sign, or simulates fear so that the other may become bolder, etc.

4. Among fellow players there must be moral equality as regards the hope of gaining and as regards the peril of losing; otherwise justice would be injured (III, 882; H. Ap., X, 216). This equality in practice would be injured especially when someone deceitfully hid his skill (III, 881).

Note. a) Since it is licit, on the occasion of a profane business, to exchange spiritual things, it is licit to place prayers for the price of a game, as the use of pious persons proves. Otherwise, if one were to play with money, but the other with prayers; for that would be simony. b) Restitution of unjust gain is not to be urged if condonation on the part of the conquered can be supposed; which is easily supposed if it is a question of a matter of lesser moment.

IT IS ASKED. What must be observed from POSITIVE LAW as regards game?

Resp. The dispositions of Law are various: 1. Some games are positively approved, for example those which are ordered to exercise of the body; as regards these the law concedes action to the victor, so that he can seek the gain. Yet judges can refuse action if it is a question of a prize of excessive value.

2. Others are neither approved nor prohibited, and the law concedes no action, either to the victor for seeking the gain, or to the conquered for demanding back what he has already paid; unless fraud or deceit intervened on the part of the victor. Therefore one must stand by the natural obligation.

3. Others are prohibited, yet nevertheless they are not made void by that very fact: the law concedes no action to the victor; on the other hand it concedes to the conquered an action for demanding back the prize already paid. From the common and more probable opinion, the conquered, in such a game, is not held to pay; but if he has paid, he can with a safe conscience demand back what was paid. If the players from the beginning renounced the benefit of the law, the renunciation does not have force, which the law declares invalid on account of the common good; yet if the cession (which per se is concerning a licit thing) had been confirmed by oath, it would be wrong to withdraw from it, on account of reverence for religion (Lugo and Lessius, ap. St. Alphonsus, l. c.).

4. Others are prohibited and altogether made void, so that the gain cannot be retained by title of victory, but only by title of gratuitous donation, if it pleased the conquered to make it (III, 887-894; see Code, l. c.).

Note. Game, if one indulges in it immoderately, imports many and grave evils. Wherefore parish priests and confessors should attend to this, that they turn subjects and penitents away from the custom of playing, insofar as this can be done (cf. n. 410, 7). Cf. the things which Koch wisely warns, Moraltheol., § 149.

1169. We certainly do not wish, even by a brief enumeration, to touch upon the various modes by which the so-called operations of the Stock Exchange are accustomed to be made. It will be enough if we note the following.

1. The more common operations are either ad terminum or ad praemium.

a) A purchase-sale is made ad terminum if wares (values) are bought to be paid after a certain time, and indeed at the price which then will prevail on the Stock Exchange. But it can happen that on the day of payment (liquidation) the seller neither ought nor intends to hand over to the buyer the wares themselves, but only, if the change of fortune is adverse to him, to pay the difference; the difference, we say, between the foreseen value of the wares and the actual real value. The same can happen to the buyer. Therefore the speculation of both consists in this, that, trusting in good fortune, they hope either to sell for more, or to buy at a small price. b) A purchase-sale is made ad praemium if an accessory pact of reservation is attached to the contract. The buyer namely reserves to himself the right, before the day stated for payment, of rescinding the contract: in which case he pays a premium to the seller.

From these things it seems that operations of the Stock Exchange can be reduced either to purchase-sale, or to betting about the increase or decrease of money.

2. If the intrinsic morality of those operations is considered, provided that the due conditions for the liceity of sale or betting are duly observed, theoretically speaking, they are not to be condemned.

But, practically, otherwise must be said, if the innumerable evils which the custom of being occupied with games of the Stock Exchange ordinarily carries with itself are considered: a) since it is not rarely a question of an enormous amount of money, one undergoes the danger of bringing the whole family into ruin; b) so that the value of various titles may grow or be diminished, false reports are published everywhere, for example concerning danger of war, concerning scarcity of a certain merchandise, etc.; and deceived by this lie, many are induced to most pernicious contracts; c) it happens that values are heaped together in a great number, so that by the help of a certain monopoly the just price is either depressed or increased beyond what is equitable, and thus the fortune of others perishes.

Wherefore it is certainly to be desired that by those in whose hands legislative power is placed, this ulcer of domestic and civil society be cut away.

In ITALY⁰² and GERMANY,⁰³ games of the Stock Exchange strictly so called (Differenzgeschaft) are to be assimilated to other games in which, namely, no action is given to the victor; in FRANCE⁰⁴ and SPAIN,⁰⁵ that action is not denied. As regards Austria, cf. the laws of 1 Apr. 1875 and 4 Jan. 1903.

Note. To clerics who have been initiated into sacred orders, negotiation properly so called (cf. n. 2227), whence also speculation of the Stock Exchange, is altogether forbidden. Yet it must be noted that operations ad terminum cannot always be equated with speculation, as experts have affirmed to us (against Tanquerey, III, Suppl. pro Gallia, XXVII, n. 5).