Aleatory contract

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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 are insurance policies.[1][2] Such insurance contracts 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

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