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Assurance Contract

An assurance contract is a type of agreement where individuals commit to contribute to a project or cause only if a certain threshold of participation or funding is reached.

Example

A community group might use an assurance contract to raise funds for building a new park, with contributions only collected if enough money is pledged to cover the entire cost.

Key points

• An agreement where contributions are made only if a certain threshold is met.

• Reduces the risk of wasted resources by ensuring projects have sufficient support before proceeding.

• Commonly used in crowdfunding and public goods projects.

Quick Answers to Curious Questions

Contributions are only collected if a certain threshold of participation or funding is reached, ensuring that the project has sufficient support to succeed.

They are used to minimize the risk for contributors by ensuring that their funds are only used if the project is likely to succeed.

If the threshold is not met, the contributors typically get their money back, reducing the risk of losing their contributions.