aleatory contract

my own personal Waterloo

Tuesday, October 11, 2005

Aleatory Contract (n):

... a binding agreement that depends upon a contingency or uncertain event.

A contract in which the consideration or monetary value between the parties to the contract is not equal.

'Aleatory Contract:
Characterized by two design elements:

Chance element - Performance of at least one of the parties is dependent on chance. 
Uneven exchange - And, one party promises to do much more than the other party. 

Most non-insurance contracts are commutative (i.e.: the exchange is of equal values.) Many people mistakenly employ this concept when thinking about insurance. An insurance contract will only result in an equal exchange by coincidence or over a very long period of time. 

The uneven exchange is not a flaw in the contract. 

Rather, it is a fundamental feature of a contract that is both conditional and aleatory.'

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