What Is a Unilateral Contract?

What Is a Unilateral Contract?

Let me explain what a unilateral contract is. It's a one-sided contract agreement where you, as the offeror, promise to pay only after the offeree completes a specific task. In this setup, only the offeror has a contractual obligation. This differs from a bilateral contract, where both parties are bound by the agreement.

Key Takeaways

You should know that unilateral contracts are one-sided, requiring only a commitment from the offeror. They don't obligate the offeree to perform the requested task or act. These contracts are typically used for optional offers. In contrast, bilateral contracts involve agreements and obligations on both sides.

Understanding Unilateral Contracts

Unilateral contracts happen when the offeror makes an offer to another party. This requires the offeree to perform an act that the offeror requests. The offeree has no obligation to complete it, and the offeror pays only if the request is fulfilled.

These contracts are enforceable under contract law, but legal action isn't common unless the offeree claims eligibility for payment tied to the request.

Breach of contract depends on whether the terms were clear and if you can prove the offeree is eligible for payment based on the contract's provisions.

Types of Unilateral Contracts

Unilateral contracts are primarily one-sided, with no obligation from the offeree. The most common types are open requests and insurance policies.

Open Requests

As an offeror, you can use unilateral contracts for broad or optional requests, paying only when specifications are met. If the offeree completes the task, you must pay.

Rewards are a typical example, where information leading to a criminal's conviction warrants payment. Funds can go to one individual or several providing useful information.

These contracts are often used for labor requests, like paying someone to clean your house or walk your dog only after the task is done.

Insurance

Insurance policies feature unilateral contract traits, as the insurer promises payment if certain acts occur under the coverage terms. You, as the offeree, pay a premium to maintain the plan and receive coverage if a specific event happens.

The 4 Elements of a Unilateral Contract

To make a unilateral contract legally binding, four elements must be present.

Agreement

One party makes an offer to another, and both must accept it without coercion or force.

Consideration

This is the price paid for the promise, and it doesn't have to be money. It can be any property or holding that both parties agree is acceptable.

Intention

Both parties must intend to create a binding contract and understand the terms.

Certainty

Both parties must fully understand what needs to happen to complete the contract. In unilateral cases, this means an action or task must be finished.

Unilateral Contracts vs. Bilateral Contracts

Contracts can be unilateral or bilateral. In a unilateral one, only the offeror has an obligation, and the offeree isn't required to act.

In a bilateral contract, both parties agree to obligations with equal reciprocity. The main difference is the level of obligation from each side.

How Do You Know If a Contract Is Unilateral?

You can tell it's unilateral if it doesn't obligate the offeree to accept or complete the task. A bilateral contract has firm agreements between two parties.

Can You Break a Unilateral Contract?

In a unilateral contract, the offeror can revoke the offer before the offeree starts performing, and this change should be communicated before any task begins.

Are Unilateral Contract Mistakes Enforceable?

If a mistake happens, remedies include reforming the contract, starting a new one, or canceling it entirely.

The Bottom Line

In a unilateral contract, only the offeror has a contractual obligation. You'll pay for a specific task only if the offeree completes it. This contrasts with bilateral contracts where both parties are bound.