What does Aleatory Contract mean?
An aleatory contract is a contract between two parties with agreements contingent on a specific event or occurrence. For example, insurance policies are considered aleatory contracts, because the policy does not go to work for the consumer until the event itself comes to pass. Then and only then will the policy allot the consumer the agreed amount of money or services stipulated in the aleatory contract.
Sometimes, in aleatory contracts, it might benefit one party much more than it would the other. For example, say someone purchases a life insurance policy for $10,000. The aleatory contract agrees that the person will pay a monthly amount of $100 to the insurance agency until their death. However, tragically, the person dies after only making six payments over six months. The life insurance agency would have only received $600 from the purchaser, and they would still have to pay the family the $10,000 agreed upon in the aleatory contract.
Where it Came From
The term aleatory contract itself was actually created during midieval times by the Romans. Lawmakers deemed it necessary to cover contracts that depended on chance, especially for things like gambling, investments, and different types of insurances. Depending on if the event occurred by chance, or if it did not occur at all, would determine if the contract would be used to the full benefit of the purchaser. Because the odds of the event happening are low or prolonged, companies that provide aleatory contracts are able to keep money coming in from multiple purchasers, and only need to pay it out to those who actually experience the circumstance itself.
Category: Injury Law