Legal Definitions - aleatory

The term aleatory describes something that depends on an uncertain future event or a chance occurrence. In legal contexts, particularly concerning contracts, an aleatory contract is one where at least one party's obligation to perform is triggered only if a specific, unpredictable event happens. This means that the outcome or the full performance of the contract is not guaranteed and relies on an uncertain future event.

Here are some examples to illustrate this concept:

• Lottery or Prize Contest: Imagine a person buys a lottery ticket. The lottery organization promises to pay a large sum of money if the numbers on that ticket match the randomly drawn winning numbers.

  How it illustrates "aleatory": The act of buying the ticket is a definite action by the participant. However, the lottery organization's obligation to pay the prize is entirely dependent on the uncertain and chance event of the ticket numbers matching the winning draw. If the numbers don't match, the organization owes nothing further.

• Performance Bonus in a Business Deal: A software development company signs a contract to create a new application for a client. The contract includes a clause stating that the client will pay an additional bonus of $50,000 if the software achieves a specific, independently verified user satisfaction rating of 90% or higher within the first three months of its launch.

  How it illustrates "aleatory": The software company's primary obligation is to develop the application. However, the client's obligation to pay the additional $50,000 bonus is entirely conditional on the uncertain future event of the software achieving a very high user satisfaction rating. This outcome is not guaranteed and depends on many unpredictable factors, making the bonus payment aleatory.

• Contingent Payment in an Acquisition: Company A acquires Company B. As part of the acquisition agreement, Company A agrees to pay Company B's previous owners an additional $1 million two years after the acquisition if Company B's revenue grows by at least 20% during that two-year period.

  How it illustrates "aleatory": Company A's initial payment for Company B is a definite act. However, the additional $1 million payment is an aleatory element because it is entirely contingent on the uncertain future event of Company B achieving a specific revenue growth target. If the revenue target is not met, Company A has no obligation to make that additional payment.