What characteristic defines an aleatory contract?

An aleatory contract is characterized by the concept of unequal exchanges of value between the parties involved, meaning that the performance or obligation of one party depends on uncertain future events. In the context of insurance, this often manifests as the insured paying a premium that is significantly lower than the potential benefit or payout they could receive from a claim. The definition of "aleatory" comes from the Latin term "alea," which means "dice," reflecting the inherent uncertainty and risk involved in these transactions.

When an insured pays a premium, they are essentially betting against the possibility of loss, while the insurer may be required to pay out a much larger sum in the event of a claim. This characteristic of having differing values exchanged based on uncertain events is what defines aleatory contracts, making it fundamentally different from other types of contracts where the value exchanged is equal or predetermined.