When most people hear the word “contract,” agreements between two people may come to mind—like most business or personal contracts. However, these are not the only types of contracts that can exist.
A unilateral contract is a contract created by an offer that can only be accepted by performance. To form the contract, the party making the offer (called the “offeror”) makes a promise in exchange for the act of performance by the other party.
The offer can only be accepted when the other party completely performs the requested action. The easy way to remember this is to focus on the word “unilateral.” “Uni” means one—so unilateral contracts allow only one person to make a promise or agreement.
Unilateral contracts are very different from bilateral contracts, so this may be kind of a difficult concept to get the hang of, so let’s look at an example. A reward contract is a common unilateral contract that we see often in daily life.
Suppose that Susie has lost her cat. Susie offers Billy $100 if he finds her cat. This is a unilateral contract because Susie is only obligated to pay the $100 if, and only if, Billy finds the lost cat. However, Billy is under no obligation to find the lost cat—technically, he has only accepted the offer once he finds the lost cat.
Some states have specific requirements regarding unilateral contracts. For example, in some areas, Susie may be legally obligated to keep her offer open if Billy begins making sufficient efforts towards finding the lost cat (maybe he put up posters, maybe he’s been asking around at local shelters).
Unilateral contracts may seem very one-sided, but they are generally enforceable in court. The most common issue occurring with unilateral contracts happens when the offeror fails or refuses to keep their promise even when the other party completes the required action.
Both unilateral and bilateral contracts can be “breached,” or broken. An example of breaching a unilateral contract might be if Susie refuses to pay Billy the $100 when he finds her lost cat. In that case, she has broken her promise to pay, and can be considered in breach of contract.
Whether the contract is unilateral or bilateral, if you have a situation that you think constitutes a breach of contract, you will need to establish certain elements.
- The Contract Existed: If there was no contract to begin with, then it can’t be broken;
- The Contract was Broken: If the contract hasn’t been broken, there is no cause of action;
- You Suffered a Loss: If you haven’t suffered a loss of some sort, there is nothing for the court to correct; and
- The Person You’re Challenging was Responsible: You need to make sure that you are challenging the right party. Usually the party making the promise is likely to be responsible.
The easiest difference to spot between unilateral and bilateral contracts is the number of parties making promises—one in unilateral contracts, while bilateral contracts need at least two parties making promises.
The difference between the two types of contracts can be very subtle. Let’s look at Susie and her lost cat once again. Say Susie promises Billy $100 if he promises to find her lost cat. If Billy accepts her offer and promises to find Susie’s cat, this is considered a bilateral contract. Both Susie and Billy have made promises to do certain things.
They are now both legally obligated to perform the required actions under this bilateral contract. Even if Billy is not successful in actually finding the cat, Susie will be obligated to pay him the $100, especially if Billy made reasonable efforts to find the poor kitty.
Again, the difference is very subtle, but it helps to look at what is being offered in the contract. In a unilateral contract, the offeror is offering to pay for the completed action. However, in a bilateral contract, the offeror is offering to pay for the other party’s promise to perform the action. In a unilateral contract, the action must be completed in order to obligate the offeror to pay.
Generally speaking, advertisements are not considered contracts. However, there are some cases where an advertisement may be considered a unilateral contract.
For example, if Susie put a classified ad in the newspaper offering $100 to anyone who finds her lost cat, she may be obligated to pay the money to a person who responds to the ad by finding the cat.
Contract law can be very complicated, especially when it comes to factors like offer, acceptance, and consideration, all technical terms that have specific legal meanings. If you have legal issues regarding a contract (whether unilateral or bilateral), It is in your best interests to talk to an experienced contract lawyer.
A lawyer can explain your obligations under any agreement that may have been formed, or help you draft a contract if you are looking to enter an agreement with another party. Having a lawyer’s help in writing a contract is important in order to make sure your intentions are clear and understandable to everyone involved.