What does the term “aleatory” refer to in contract law?

The term "aleatory" in contract law specifically refers to contracts that are contingent upon an uncertain future event. This means that the performance or obligations under the contract are not guaranteed and depend on an event occurring that may or may not happen. A common example of an aleatory contract is an insurance policy, where the insurer's obligation to pay a claim arises only if a specific event, such as a loss or damage, occurs.

In this context, the uncertainty associated with the future event is what defines the aleatory nature of the contract. The inherent risk and potential for a mismatch in the value exchanged by the parties—such as in insurance, where one party pays premiums with no guarantee of a payout—are central to the concept of an aleatory contract. This principle underscores the unique aspects of risk, probability, and potential reward that characterize many personal lines insurance agreements.