ALEATORY - Tax Ninja's Word of the Week

• Depending on the throw of a dice or on chance; random.
• Relating to or denoting music or other forms of art involving elements of random choice (sometimes using statistical or computer techniques) during their composition, production, or performance.

What Is an Aleatory Contract?

An aleatory contract is an agreement whereby the parties involved do not have to perform a particular action until a specific, triggering, uncertain event occurs. Events are those that cannot be controlled by either party, such as natural disasters and death. Aleatory contracts are commonly used in insurance policies. For example, insurance contracts are aleatory in nature, the insurer does not have to pay the insured until an event, such as a fire that results in property loss.

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