Unilateral Contract

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What is a Unilateral Contract?

A unilateral contract is one wherein the offeror bargains for a completed performance rather than a promise to perform. To form the contract, one party (the offeror) makes a promise in exchange for the act of performance by the other party. That is, the offer is only accepted once the other party completely performs the requested for action. 

What is an Example of a Unilateral Contract?

A common example of a is a reward contract.  For example, suppose that A promises B a sum of $100 if B is able to find A’s lost cat. This is a unilateral contract because the A is only obligated to pay the $100 sum once B finds the lost cat. 

In other words, A becomes legally obligated to pay the $100 if B finds the lost cat.  However, B is under no obligation to find the cat. This is because, technically speaking, B will only have accepted A’s offer once they find the lost cat. 

In some jurisdictions, A becomes legally obligated to hold the offer open if B begins the process of performance. That is, if B begins making sufficient efforts towards finding the lost cat, then A may incur an obligation based on B’s partial performance. 

Legal Enforceability

Even though this type of contract may seem one-sided, they are generally enforceable in court. However, a common issue arrises where the offeror fails to keep their promise even when the other party completed the performance.

So, in our example, suppose again that A promises B $100 if B finds their lost cat. Until B finds the lost cat, A is not obligated at all to pay B anything. However, once B finds the lost cat, A then becomes obligated to pay B the $100. If A fails to render the $100, B may have a claim against A for the $100, as A is legally obligated to keep their promise. 

What is the Difference Between Unilateral and Bi-Lateral Contracts?

On the other hand, in a bilateral contract, both sides are obligated by some sort of promise to the other. Suppose in our example above that A promises B the sum of $100 if B promises to find A’s lost cat. 

If B accepts the offer and promises to find B’s cat, this is considered to be a bilateral contract. This is because B now has now accepted the offer and is legally obligated to find the cat because they promised to do so. Even if B is not successful in finding the cat, A may eventually have to pay the $100, especially if B made reasonable efforts to find it. This is because A had contracted for the promise, rather than the completed act of actually finding the lost cat. 

This is a subtle difference, but the easiest way to tell the difference between bilateral and unilateral contracts is by looking at what is being offered. In a unilateral contract, the offeror offers to pay for completed performance of an act, whereas in a bilateral contract, the offeror is offering to pay for the other party’s promise to perform the act.

Are Advertisements Unilateral Contracts?

Although most advertisements are not considered contracts, some advertisements may be considered unilateral contracts. For example, if A published a notice in the newspaper informing the public that they will pay $100 to anyone who finds their lost cat, this might form a contractual relationship. If someone responds to the ad by finding the lost cat, A may then be legally bound to pay them the $100.

Do I need a Lawyer for Unilateral Contracts?

This type of contract can actually be quite complicated, especially with regards to technical terms such as offer, acceptance, and consideration. If you have legal issues involving a unilateral contract, you may wish to speak with a contracts lawyer. Your lawyer can explain to you whether you are obligated under any agreement that was formed. Also, if you wish to draft a contract, a lawyer can help you state your intentions in a manner that is clear and understandable. 

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Last Modified: 10-03-2014 02:11 PM PDT

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