Aleatory contract

An aleatory contract is a contract in which the performance of one or both parties is contingent upon the occurrence of a particular event. The most common type of aleatory contract is an insurance policy.^[1]^[2] Such an insurance contract may be a boon to one party but create a major loss for the other, as more in benefits may be paid out than actual premiums received, or vice versa.^[3]

The term was a classification developed in later medieval Roman law to cover all contracts whose fulfilment depended on chance, including gambling, insurance, speculative investment and life annuities.^[4] Many modern forms of derivatives and options may in some cases also be considered aleatory contracts. For example, the French civil code contains a chapter on aleatory contracts, with specific provisions for gaming (gambling) and life annuities.^[5]

References

^ Thomson-Gale Encyclopedia of American Law, courtesy of Jrank
^ Black's Law Dictionary, 7th ed. 1999
^ Barron's Dictionary of Insurance Terms, courtesy of Answers.com
^ J. Franklin, The Science of Conjecture: Evidence and Probability Before Pascal (Baltimore: Johns Hopkins University Press, 2001), ch. 11.
^ Text of French Civil Code (in English)

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Aleatory contract