Aleatory Contract
Categories: Insurance, Regulations
Let's start out with a quick general definition. Aleatory: random, or depending on chance.
If you already knew that...gold star! If you're one of the 99.5% of the rest of the population who have never heard that word before, you are much closer to understanding an aleatory contract.
Basically, an aleatory contract is one that doesn't kick in until some event takes place. Another aspect is that the transfer of value between the parties in the contract is uneven.
That's probably hard to imagine in a concrete way, but it happens all the time. The most common type of aleatory contract: an insurance agreement.
In an insurance contract, one party might pay another premiums for 10 years without getting anything in return (i.e. an uneven value transfer). Eventually some terrible event happens (randomness or chance). That brings the other side of the contract into play, obligating the insurance company to cover the damages (triggered by some event).
