Key Takeaways

  • Unilateral contract acceptance requires performance, not a promise.
  • Offers in unilateral contracts can usually be revoked until performance begins.
  • Common examples include rewards, insurance claims, and service-based offers.
  • Once performance starts in a unilateral contract, the offeror may be legally bound to honor the deal.
  • Acceptance does not require notification unless explicitly stated in the offer.

Unilateral acceptance of a contract can only take place by means of actual performance. This is in contrast to bilateral contracts, which are accepted by means of a promise made.

To use an example to explain unilateral acceptance, imagine Michelangelo agreed to pay Picasso $500 for painting his beach house. Picasso accepted the offer and agreed to do the job. A couple of days later, before Picasso started painting, Michelangelo changed his mind and recanted the offer that he made to Picasso. Under these circumstances, Michelangelo would be allowed to take his offer back, because Picasso had not started the work yet. According to the principles of unilateral acceptance, promises are nothing and performance is everything.

The way in which a contract needs to be accepted will vary depending on the offer. If a promise is exchanged for a promise, then the offer is a bilateral contract.

Exceptions about acceptance

The only exception to the rules about acceptance in a bilateral contract is if the job is already done before the offer is recanted. To use the example of Michelangelo and his beach house again, consider a different scenario:

  • After receiving the offer of $500 for the job, Michelangelo did not respond.
  • Despite his lack of response, he went to the beach house the next day and started painting.
  • Two days later, he was done, and then Picasso retracted his offer.

In this scenario, if Picasso were to fail to pay Michelangelo for his work, he could be sued and would lose the case. The fact that Michelangelo failed to respond to the promise with a promise of his own, he offered full performance. In a case like this, full performance proves that he accepted the offer, and a contract would thus have been formed.

It is important to note that although a promise is required in order for a bilateral contract to be accepted, this promise does not have to be given verbally. A simple nod of Michelangelo's head could construe acceptance of the offer to paint Picasso's house. Alternatively, if the pair had been at the beach house when the offer was made, Michelangelo could simply have picked up a brush and started painting, provided that Picasso could see what he was doing.

In a case like this, the fact that Michelangelo immediately got started on the job, in full sight of Picasso, would form affirmation and nonverbal acceptance of the offer.

How Unilateral Contract Acceptance Differs from Bilateral Contracts

In a unilateral contract, only one party makes a promise, and the other party accepts by taking action. This is fundamentally different from a bilateral contract, where both parties exchange promises at the outset.

Key distinctions include:

  • Offer and Acceptance:
    • Unilateral: Offer is accepted by performance only.
    • Bilateral: Offer is accepted through a return promise.
  • Legal Obligation:
    • Unilateral: The offeror becomes bound only when performance begins.
    • Bilateral: Both parties are immediately bound upon exchange of promises.
  • Revocation Rules:
    • In unilateral contracts, an offer can generally be revoked anytime before performance starts. However, once the offeree begins performance, some jurisdictions consider the offer irrevocable until the job is complete.

For example, if a company offers a $1,000 reward to anyone who returns a lost dog, a contract is only formed when someone finds and returns the dog—not when they start looking.

Acceptance of an offer

In most circumstances, an offer must be accepted by means of communication with the person making the offer. If the person being offered a job wishes to accept it, he needs to tell the person who has offered him the job. However, in certain circumstances, the person offering a job can expressly waive this requirement, meaning that the offeree is entitled to accept an offer without expressly informing the person making the offer.

According to the general rule, a contract is complete once the job has been done. However, the person making the offer is not obligated until such time as the contractor informs him that the job is done. For example, consider the following scenario:

  • Michelangelo had agreed to pay Picasso $500 for painting his beach house within the next two weeks.
  • On the day that he completed the work, Picasso informed Michelangelo that the job was done.

Only then would Michelangelo be obliged to pay Picasso for the work.

In a situation like this, the contractor would need to tell the client the job is complete within a reasonable time frame. If this didn't occur, then the contractual obligation would fall away. As an example, if Michelangelo promised to pay Picasso $500 for painting his house within the next two weeks, but was only told six months later that he had finished the job, Michelangelo would no longer be legally required to pay Picasso.

It must be noted that if Michelangelo tried to tell Picasso that the job was complete, but had not been successful, then Picasso would still be required to pay. This would apply if, for example, Michelangelo had written Picasso a letter telling him that the job was done, but the letter got lost in the post.

Limitations and Legal Challenges

Although unilateral contracts are legally valid, they can present challenges:

  • Ambiguous Performance Requirements
    Offers must clearly define the performance required. Vague terms can result in legal disputes.
  • Disputes Over Timing
    If the offeree begins performance but does not complete it, courts may need to determine whether a contract was formed and what obligations exist.
  • Revocation Before Completion
    One of the most contentious aspects is whether the offeror can revoke the offer once performance has started. Many courts protect the offeree’s interest by treating the offer as irrevocable once substantial performance has begun.
  • Proof of Performance
    The burden is on the offeree to prove that they completed the required task under the terms of the offer.

In some cases, courts may apply promissory estoppel or other equitable doctrines to prevent unjust outcomes when strict application of unilateral contract principles would be unfair.

Key Elements of a Valid Unilateral Contract

For a unilateral contract to be enforceable, several essential elements must be present:

  1. Clear Offer
    • The offer must specify the conditions required for acceptance through performance.
  2. Intent to Be Bound
    • The offeror must intend to be legally bound if the specified performance is completed.
  3. Communication of the Offer
    • The offer must be effectively communicated to the offeree, even if the offeree does not directly acknowledge it.
  4. Completion of Performance
    • Only full performance by the offeree can create a binding obligation on the offeror.
  5. Legal Capacity and Consideration
    • As with any contract, both parties must have the capacity to contract, and the performance must constitute valid consideration.

Failure to meet these conditions may render a unilateral contract void or unenforceable.

Real-World Examples of Unilateral Contract Acceptance

Understanding how unilateral contract acceptance works in the real world can clarify its application. Common examples include:

  • Reward Offers:
    If someone posts a reward for a lost item, a contract is formed only when the item is returned. The person who finds and returns it is entitled to the reward, even if they never communicated with the offeror beforehand.
  • Insurance Policies:
    Some insurance contracts operate as unilateral contracts. The insurer promises to pay upon the occurrence of a specific event (e.g., death in a life insurance policy), and the insured party pays premiums without promising anything else.
  • Service Promotions:
    Businesses may offer unilateral promotions like, “We’ll give you a free month of service if you refer a friend.” The contract forms only when the action (referral) is completed.
  • Public Offers:
    When a company or individual issues a public offer that promises payment upon completion of a specific task, those offers are generally treated as unilateral contracts.

These examples reinforce the principle that action, not promise, constitutes acceptance in unilateral contracts.

Frequently Asked Questions

  1. What is unilateral contract acceptance?
    Unilateral contract acceptance occurs when the offeree accepts an offer by performing the required task, rather than promising to do it.
  2. Can a unilateral contract be revoked after performance has started?
    Generally, no. Once the offeree begins substantial performance, the offer is typically considered irrevocable in many jurisdictions.
  3. Is notification required to accept a unilateral contract?
    Usually not, unless the offer specifically requires it. Performance alone typically suffices.
  4. What are common examples of unilateral contracts?
    Reward offers, certain insurance policies, and service-based promotions are common examples.
  5. What happens if the offeree partially performs but doesn’t finish?
    This may lead to legal disputes. Courts might assess whether substantial performance occurred or apply equitable remedies depending on the circumstances.

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