What is a unilateral contract?

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Jul 16, 2021

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A unilateral contract is a contract where only one person makes a promise. It is distinguished from a bilateral contract, where there is a mutual exchange of promises (each party to the contract makes a promise). In order for a unilateral contract to be considered legally enforceable, the promise must be considered an offer, and it must be accepted.

What Are the Differences between Unilateral Versus Bilateral Contracts?

Contracts are agreements negotiated between two parties that become legally enforceable. When one of the parties to a contract fails to do what he or she agreed to do, the other can sue for breach of contract. Then the court will award actual damages to the wronged party.

In order for a contract to be legally binding, the two parties to the contract must have exchanged something of value. In other words, each party must have done something, or given something up. In a bilateral contract, the things of value that are exchanged come in the form of mutual promises. For instance, Kyle might promise to walk Joe’s dog, and Joe might promise to pay Kyle $100 in exchange for the dog walking service.

In a unilateral contract, however, only one party makes a promise. The binding contract is not created by this promise alone, but instead comes into existence when the other party does an act or abstains from doing an act because of the promise. This is more common in business contracts.

In a unilateral contract, Kyle might promise $100 in exchange for Joe walking his dog. This is different from Kyle promising to pay $100 and Joe promising to walk the dog. In the first example, Kyle and Joe both made a promise creating a bilateral contract. In the second example, Kyle made a promise, but Joe did not. The only way that a binding contract will be formed here is if Joe walks the dog because of Kyle’s promise. Joe doesn’t have to walk the dog at all if he does not want to. If Joe does not walk the dog, Kyle has no obligation. When Joe picks up the leash and goes for a walk, Kyle becomes bound by the contract and has to pay for the service.

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What’s Required for a Unilateral Contract to Stand?

Not every promise that is made has the potential to create a unilateral contract. Different types of contracts can be unilateral or bilateral based on small differences in the details. The promise must be an express promise between contracting parties. It must clearly offer something of value in exchange for another party doing something (or not doing something). If Kyle simply said to Joe: “I promise to give you $100”, this would not create the potential for a unilateral contract since there is no act or omission required on Joe’s part to receive the $100.

Because the promise must offer something of value in exchange for an act or omission, the person who makes the promise in a unilateral contract is generally referred to as the offeror. The offer also has to specify how the offer is to be accepted. The other party who has the chance to accept is referred to as the offeree.

The offerree has no obligation to act at all (Joe doesn’t have to walk Kyle’s dog). The offerree therefore has the power of acceptance. If the offeree chooses to exercise that power and do what was requested (thereby accepting the offer), then a binding contract is formed.

What Are Examples of Unilateral Contracts?

There are many different examples of unilateral contracts. One common type is the offer of a reward. An offeror might, for instance, offer a $200 reward if his lost dog is returned safely. No one is obligated to return his dog. So no contract is created by the making of this offer. However, it is an express promise, and it is clear how someone can accept to create a binding contract. Someone can bring back the dog.

If someone does indeed return the dog, then the offer has been accepted, and a legally binding contract is created. The dog owner thus has the obligation to pay the $200 reward and the finder of the dog could file a lawsuit if the dog owner failed to do so.

Another common example is a property sales contract. The purchaser typically submits an offer when buying a house. This type of agreement may lead to counteroffers being sent, and they eventually turn into bilateral agreements once an offer is accepted. Once an officer is accepted, the unilateral contract becomes bilateral, and they’re typically locked against changes unless both parties agree.

How Do Parties Create a Valid Contract?

As you might see in courts, not all “contracts” are legally binding. One might assume that if two parties agree to something, it sticks. The courts are full of property deals, insurance policies, and other contracts that were not as simple as one side thought. One of the best ways to make sure your contract is solid is to work with a contracts lawyer or other professional. If you’re trying to buy a house, you would wants to call a realtor.

Once they draw up an acceptable contract, make sure to put your initials at the bottom of each page. This is the easiest way to avoid unauthorized changes in the contract later on. Depending on the type of contract, it may also need to be notarized.

Finally, any parties involved need to follow the contract as it’s laid out. In some cases, a contract will lay out procedures for any unilateral contract modification or otherwise. They would also lay out when one or both parties could withdraw without penalty and awards to an injured party should the contract lapse in the simplest terms.

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Getting Legal Help

In some cases, it can be a challenge to determine whether an express promise or offer was made. It can also be tricky to determine whether the offer was or was not accepted. As such, anyone who has concerns about a unilateral contract should consult with an experienced contract law attorney for guidance and advice.

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