Key Takeaways

  • A unilateral contract involves a promise made by one party, enforceable only after the other party completes a specified act.
  • Common unilateral contract examples include rewards for lost items, insurance policies, and public offers.
  • Courts often consider partial performance and intent when determining if a unilateral contract is enforceable.
  • Unilateral contracts are legally binding when the requested performance is completed.
  • Knowing the differences between unilateral and bilateral contracts is essential for understanding legal obligations in business and personal contexts.

Unilateral offer cases are agreements in which one party negotiates for a completed performance instead of a promise to perform. Unilateral contracts differ from bilateral contracts, in which each party makes a promise to the other.

In order to establish a unilateral contract, the offerer makes an agreement in exchange for the performance of the other party. In other words, the other party must fully perform the requested action in order for the offer to be accepted. Once the offeree has completed the agreed-upon act, the offerer may not reject it.

In terms of business, just one party agrees to take a specific action. These types of contracts don't require the offerer to be notified of another party's acceptance of the agreement until it is fulfilled. This is an important distinction between a unilateral business contract and a bilateral business contract, which will be compared below.

Both the offerer and the offeree may be protected by a unilateral business contract. If the applicable terms of a unilateral agreement may only be fulfilled once, then the offerer has protection from several parties trying to fulfill the contract actions at the same time. For example, a reward poster may promise a cash reward in exchange for a returned pet, which may only be fulfilled once.

The definition of a unilateral contract is one in which no offerer receives a promise as consideration for their own promise. However, based upon American court history, another kind of unilateral contract also exists. According to American law, a bilateral agreement fulfilled by just one of the parties may be considered a unilateral agreement, regardless of its initial bilateral nature. The performance of only one party may categorize such an agreement as a unilateral contract.

Examples of Unilateral Offers

As mentioned above, a typical example of a unilateral offer or contract is that of a reward agreement. Let's suppose that Alice agreed to pay Bella a total of $200 if Bella can find Alice's missing dog. Only Alice is required to pay $200 once Bella finds the missing dog, hence it is a unilateral agreement. This means that Alice is obligated to pay if Bella can locate the missing dog, but Bella is not legally obligated to find the dog. Bella will only have accepted Alice's promise once she finds the missing dog.

Depending on the jurisdiction, Alice may be legally required to keep the offer open if Bella starts searching for the dog. In this case, Bella's partial performance may generate an obligation on Alice's end.

Another typical example of such a contract is an insurance contract. The insured party does not have any obligation of action, rather the insurance company is the one obligated to provide services in certain cases.

Additional Real-Life Unilateral Contract Examples

Beyond the classic lost dog reward scenario, unilateral contracts appear in various sectors and everyday situations. Here are more real-world unilateral contract examples that illustrate how these one-sided agreements function:

  • Promotional Contests: A company promises a cash prize to anyone who completes a specific challenge, like a fitness app offering a $500 reward to users who log 10,000 steps every day for a month.
  • Service Guarantees: A dry cleaner advertises, "We will remove any stain or your money back." Customers aren't required to make a promise, but if they present a stained item and the company fails to deliver, the contract is triggered.
  • Public Rewards: Government agencies sometimes offer cash rewards for information leading to an arrest. The person who provides the tip doesn’t enter a contract by agreeing to help—only by successfully performing the act.
  • Online Offers: Digital platforms may offer a unilateral agreement, such as providing a free service to users who complete a survey or refer a certain number of friends.

Each of these represents a legally enforceable obligation once the specified act is completed by the offeree.

Unilateral and Bilateral Contracts

In legal terms, contracts are agreements made between two or more parties that are legally enforceable. If a party to the contract does not act as they have promised, the other can sue them for breach of contract, and the court will determine damages to the injured (wronged) party. For an agreement to be legally binding, the parties must exchange something of value. Each party must do something or give up something, which may or may not be monetary.

  • A bilateral contract involves an exchange of mutual promises. For example, Katie may agree to walk Alice's dog, and Alice may agree to pay Katie $50 per month in exchange for the dog-walking service. Both parties have agreed to offer something, and thus, both parties are bound by a promises made to each other.
  • In a unilateral contract, only one party promises something to the other. In this example, Alice may promise to pay Katie for her dog-walking services, but Katie does not promise to walk the dog. In this example, only one party has promised to fulfill an action. In this type of contract, the offerer's agreement only comes in effect when the other party fulfills the condition(s) of the agreement. Katie has no obligation to walk Alice's dog. However, if she does, Alice is bound to the terms of the contract and must pay for the dog-walking service.

Common Business Uses of Unilateral Contracts

Unilateral contracts are often used in business and marketing strategies to motivate consumer or employee actions. Examples include:

  • Referral Programs: A company offers $50 to customers who refer a friend. The customer is not bound to refer anyone, but if they do, they are entitled to compensation.
  • Bonus Incentives: Employers may post a bonus offer to the entire staff for achieving a specific sales goal. No one is obligated to work toward it, but those who meet the criteria earn the reward.
  • Freemium Services: Software companies may unlock premium features if users perform certain tasks, such as submitting reviews or inviting others.

These uses help businesses reduce risk by only incurring costs after the desired performance is completed.

Legal Principles Behind Unilateral Contracts

Courts apply several legal principles when evaluating unilateral contracts:

  • Consideration: While no mutual promise exists, the act performed by the offeree (like returning a lost item) serves as valid consideration.
  • Offer Clarity: The terms of the offer must be clear, definite, and communicated to the offeree.
  • Acceptance by Action: The contract is accepted when the offeree completes the requested act—not before.
  • Enforceability: If the action is performed, the offeror must fulfill their promise; failure may lead to legal remedies, including damages.

These principles ensure that even though only one party makes a promise, the legal framework upholds fairness when the performance occurs.

When Do Unilateral Contracts Become Legally Binding?

A key legal distinction of unilateral contracts is that they become binding only upon full performance. Courts have recognized that:

  • Partial performance may create a temporary obligation for the offeror not to revoke the offer mid-performance.
  • An offeror cannot rescind the contract once the offeree has started performing in good faith, depending on the jurisdiction.
  • Intent and clarity are critical: the offer must be specific enough for the offeree to understand what action is expected in return.

For example, if someone offers a $1,000 reward for returning a lost laptop and the finder begins actively searching, some courts may consider this partial performance sufficient to prevent the offer from being revoked.

Frequently Asked Questions

1. What makes a contract unilateral? A unilateral contract is created when one party makes a promise in exchange for an action, not a return promise. It becomes enforceable once the requested action is completed.

2. Is acceptance required in a unilateral contract? Acceptance occurs through performance, not through a verbal or written agreement. The contract is not binding until the offeree performs the task specified.

3. Can a unilateral offer be revoked? Yes, but once the offeree has started performing, some jurisdictions may prohibit revocation to prevent unjust outcomes.

4. How does a unilateral contract differ from a bilateral one? In a bilateral contract, both parties make mutual promises. In a unilateral contract, only the offeror is bound—until the offeree completes the requested action.

5. Are unilateral contracts enforceable in court? Yes. If the action requested in the offer is completed, courts generally enforce the promise made by the offeror.

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