Key Takeaways

  • A unilateral contract involves one party promising something in return for a specific action by another.
  • Examples include rewards, insurance policies, and contests, where one party is not obligated until performance occurs.
  • Unilateral contracts are binding only after performance begins or is completed.
  • Courts can enforce unilateral contracts once substantial performance is evident.
  • Comparing unilateral and bilateral contracts helps clarify mutual obligations and legal remedies.
  • Additional real-world unilateral contract examples include employment incentives, service guarantees, and certain commercial offers.

If you need examples of unilateral contracts, you should know that a unilateral contract is one in which the buyer intends to pay for a specified performance or legal act. When it comes to a unilateral agreement, only one party pays the other for a specific duty. If that party completes the duty, the other party needs to pay accordingly.

How Does a Unilateral Contract Work?

With a unilateral contract, the first party is not under any obligation to pay, and the second party only needs to fulfill the duty if they wish to. For instance, Jim offers a unilateral contract to pay Shelley $3,000 if she puts Jim's boat into storage. Shelley has no legal obligation to store the boat, but if she chooses to, Jim has to pay her the $3,000.

Unilateral contracts are also enforceable in court, even though legal situations cannot arise until a party claims to finish a certain task.

Because a unilateral contract has no validity until one party completes a task, legal contestation usually takes the form of the giving party not paying the agreed sum. A contract breach would then be based on the clarity of the agreement, and whether one party can prove that the task was completed.

In addition, unilateral contracts can offer rewards other than money, but cash is a primary incentive. For instance, Jerry places an advertisement offering to pay $500 for the return of his missing dog. In this instance, any person may enter into a unilateral agreement by returning the dog. This is one of the few cases where an advertisement is considered a contract within itself.

Also, an insurance company can agree to pay an insured person money if certain events occur. This is a unilateral agreement, and the insurance company will not have to pay if the events never happen.

Note that not all promises can create a unilateral agreement.

Unilateral Contract Examples in Real Life

Unilateral contracts are common in everyday situations where one party promises to pay or provide something in return for a completed act, not a mutual exchange of promises. Here are several unilateral contract examples:

  • Lost Pet Reward: An ad offering $200 for the return of a lost dog is a classic unilateral contract. The contract is only formed once someone returns the pet.
  • Public Contests: Promotions promising a prize to the first person who completes a task (e.g., "First 100 customers to arrive get a free coffee") are unilateral in nature.
  • Service Guarantees: A company offering “$50 off your next bill if our technician doesn’t arrive on time” enters into a unilateral contract, triggered by the customer’s performance (booking and waiting).
  • Employment Incentives: An employer may offer a referral bonus to any employee who refers a qualified candidate. The contract is formed only when the candidate is hired.
  • Insurance Policies: When an individual pays premiums, the insurer unilaterally promises payment upon a qualifying event, like an accident or illness.

Unilateral Agreement Stipulations

The promise itself must be an express promise. The contract must clearly offer something valuable in exchange for the other party performing a service. Since the promise must offer something of value in return for an omission or act, that person who made the promise in a unilateral agreement is known as the offeror.

The opposite party who may accept is called the offeree, and the offeree has no duty to act in any way. Therefore, the offeree has the power to accept or reject the offer. If the offeree chooses to accept and honor the unilateral agreement, the contract is formed and legally viable.

Legal Elements Required in Unilateral Contracts

For a unilateral contract to be legally binding, several elements must be present:

  • Clear Offer: The offeror must make an unambiguous promise.
  • Consideration: There must be something of value offered (e.g., money for returning a lost item).
  • Performance: The contract becomes binding only when the offeree starts or completes the specified action.
  • Intention to Create Legal Relations: The offer must imply a willingness to be legally bound once the action is completed.
  • Legal Capacity: Both parties must be legally able to enter into the contract.

Unilateral Complications

Complications can arise when it comes to unilateral contracts, especially in areas pertaining to:

  • Acceptance
  • Consideration
  • Offer

If you have a legal issue that involves a unilateral agreement, you should contact a lawyer to find out what options you have.

Bilateral Agreement

A bilateral contract is an agreement between at least two groups of people, and most people or businesses would fit into this category. In fact, you enter into bilateral agreements when you do the following:

  • Purchase a product at a store.
  • Order meals at restaurants.
  • Get treated by a doctor.

In each of these types of situations, a promise is made by you to perform an action involving another person in response to that person's action.

The difference between a bilateral contract and a unilateral contract in the above types of situations is with a unilateral contract, the person responsible for fulfilling the request is not obligated to do so.

Broken Agreement

Regardless of the contract form, a contract breach occurs when parties fail to honor the agreement.

For instance, if you offer $200 to someone who returns your dog and refuse to pay because you believe the offeree stole your pet from you, you're still in violation of the contract because you failed to pay that individual.

In a workplace setting, a bilateral agreement may be severed if:

  • A coworker does not complete a task.
  • An employee does something that's restricted under his or her contract.
  • A customer stops the contractor from completing the task at hand.

Bilateral Contract Example

In the example of Ted's dog, the contract would be bilateral if Sara enters into an exclusive contract with him to search for the dog, as each party would then be under an obligation. The main distinction between bilateral and unilateral agreements is that a bilateral agreement creates a reciprocal obligation. Sara is now obligated to look for the dog and could be in violation of the contract for failing to do so. Ted is also under an obligation, as he would pay Jill $200 for the dog's return, and he cannot offer the same agreement to outside parties.

Enforcing Bilateral or Unilateral Contracts in Court

Both bilateral and unilateral contracts are legally enforceable. Bilateral contracts are enforceable from inception, as both parties have promised to fulfill the contract. Unilateral contracts are enforceable only when a person begins fulfilling the contract, which can be at any time. In the event there is a breach of contract, you will be required to produce proof and/or establish the following:

  • There was an actual contract in place.
  • The contract was breached/broken.
  • Because of the broken contract, you suffered a loss.
  • The person you're filing suit against is the person responsible for upholding the contract.

When Are Unilateral Contracts Enforceable?

Unilateral contracts become enforceable when the offeree starts performance. For example, if someone begins the act of searching for a lost pet in response to a public offer, the offeror cannot revoke the contract once the action has begun. Courts typically uphold such contracts if the offeree has made substantial progress, demonstrating reliance on the promise.

In some jurisdictions, partial performance by the offeree makes the offer irrevocable for a reasonable time needed to complete the act. This ensures fairness and discourages unjust enrichment.

Frequently Asked Questions

1. What is a unilateral contract? A unilateral contract is a one-sided agreement where one party makes a promise in exchange for the performance of a specific act by another party.

2. How is a unilateral contract different from a bilateral contract? A bilateral contract involves mutual promises from both parties, while a unilateral contract only requires one party to act for the contract to become binding.

3. Is a unilateral contract enforceable in court? Yes, but only after the offeree begins or completes the act specified in the contract. Courts often require evidence of substantial performance.

4. Can an offer in a unilateral contract be revoked? Generally, it can be revoked until performance begins. Once performance starts, the offer may become irrevocable until the act is completed.

5. Are advertisements considered unilateral contracts? Not usually, unless they clearly promise a reward or benefit in exchange for a specific action (e.g., returning a lost pet).

To get additional examples of unilateral contracts, you can post your legal need on the UpCounsel marketplace. UpCounsel has some of the best attorneys in the nation, and they will help you draft a solid unilateral agreement that will attract interested parties. In addition, our attorneys will help you craft clear and concise language that communicates your intentions, and they will help you through any legal difficulties that may come your way.