Which statement describes an aleatory contract?

An aleatory contract is characterized by its dependence on uncertain future events, meaning that the performance of the contract hinges on an event occurring that is not guaranteed. This is a fundamental aspect of insurance contracts, including funeral and burial insurance, where one party agrees to pay a premium while the other party promises to provide a benefit in the event of a particular situation, such as death. The benefits are contingent upon this uncertain event happening, which can happen at varying points in time, reflecting the inherent uncertainty involved.

In contrast, contracts based on fixed terms or those that require equal value exchanged by both parties lack the element of uncertainty that defines an aleatory contract. Similarly, contracts that guarantee a specific outcome do not fit the aleatory definition, as they do not involve the variability that is a hallmark of such agreements. Therefore, the correct characterization of an aleatory contract revolves around its reliance on uncertain future events.