Bilateral Agreements: Everything You Need to Know
Bilateral agreements exist when both parties involved in a contract make a promise, or have a responsibility to uphold.3 min read
2. Similarities in Bilateral and Unilateral Agreements
3. Trade Agreements
Bilateral agreements exist when both parties involved in a contract make a promise, or have a responsibility to uphold. This differs from a unilateral contract, which is where only one party involved has the burden of responsibility. A common example of a bilateral agreement is simple employment: one party is committing to reporting to work on certain days and doing their assigned tasks, and in return, the other party is committed to providing health insurance and a retirement plan. The majority of business agreements that exist are generally considered to be bilateral agreements.
A common example of a unilateral agreement would be providers of life insurance policies. The insurance company has promised to pay out a certain amount to the beneficiary of the policy holder, upon the holders passing. Until that time, the insurance company has no obligation to the policy holder.
Bilateral vs. Unilateral
Having already touched upon the key differences between a bilateral and unilateral agreement (whether or not one or two parties have made a promise which they are expected to fulfill), there are some additional differences, as well. Among these differences:
- While perhaps seemingly vague, take a look at what is being exchanged between the parties and when.
- In a unilateral agreement, one party may be providing financial payment upon completion of a job. Even though there is still some type of exchange taking place, this is still considered a unilateral agreement.
- With a bilateral agreement, the exchange of goods or services generally occurs at the onset. For example, as an employee is doing their job, the employer has promised to provide sufficient office supplies and technology in order to facilitate the employee doing their job.
Similarities in Bilateral and Unilateral Agreements
While there are differences, to be sure, there also exist some similarities between bilateral and unilateral agreements. Some key similarities include:
- Both unilateral and bilateral agreements can be breached. A breach of contract occurs when one or both parties does not uphold their end of the agreement. For example, if the life insurance company does not pay to the beneficiaries the value of the policy upon the policy holder’s passing, this would be an example of a breach of contract in a unilateral agreement. An example of a breach of contract as it pertains to a bilateral agreement would be if an employer refuses to pay an employee, despite the employee fulfilling their duties.
- The same burden of proof exists with both types of agreements, when it comes to taking action against someone for breach of contract. This includes proving that a contract was established, proving that the contract was in fact broken, proving that one of the parties suffered some type of loss (usually, financial, although the loss can also be material), and finally, that the other party was responsible for the aforementioned loss and breach of contract.
- Both agreements can be enforced in a court of law.
- Neither of these agreements are enforceable if one of the parties is under the age of 18, as minors (at least in the United States) cannot enter into legal contracts, unless they have been emancipated from their parents or legal guardians.
Depending upon the nature of your business, you may find yourself in the position to enter into a bilateral trade agreement. While this may sound rather intimidating, it does not have to be and it generally only applies to nations and government entities. This type of agreement exists between two governments, providing favored trade relations between them. For example, the United States may have a bilateral trade agreement with Mexico wherein the U.S. provides Mexico with high-quality apples and Mexico provides the United States with high-quality bananas. By opening up trade between countries this way, it facilitates economic growth; grocery stores that may not otherwise be able to can now sell bananas.
Additionally, by entering into a bilateral trade agreement, certain tariffs may not need to be enforced, purchase guarantees are established (the United States will purchase a certain number of banana bunches and Mexico will purchase a certain number of apple bushels), while also serving as a way of opening up communication regarding other relationship issues between the two countries.
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