Aleatory Contract Law and Legal Definition

An aleatory contract is a contract whose execution or performance is contingent upon the occurrence of a particular event or contingency or an uncertain (random) event beyond the control of either party. Most insurance policies are aleatory contracts. For example, in a contract of insurance, an insured pays a premium in exchange for an insurance company's promise to pay damages up to the face amount of the policy in the event of a person’s house being destroyed by fire. The insurance company must perform its obligation only after the fortuitous event, the fire, occurs. Another type of aleatory contract is where each party runs a risk which is the consideration of the engagement of the other. For example, when a person buys an annuity, s/he runs the risk of losing the consideration in case of her/his death soon after. On the other hand the person may live so as to receive three times the amount of the price s/he paid for it.