Key Takeaways
- One-sided promise; only offeror initially bound.
- Contract forms upon offeree's complete performance.
- Offer can be revoked before performance starts.
- Common in rewards, insurance, and contests.
What is Unilateral Contract?
A unilateral contract is a one-sided legal agreement where only the offeror makes a binding promise, which the offeree accepts by completing a specific act rather than by making a reciprocal promise. This contract type creates an obligation for the offeror only after the requested performance occurs.
Unlike bilateral contracts, unilateral contracts depend on the offeree's full performance to form a binding agreement.
Key Characteristics
Unilateral contracts have distinct features that differentiate them from other agreements:
- One-sided promise: The offeror commits upfront, while the offeree is not obligated until they perform the act.
- Acceptance by performance: The contract is accepted only when the offeree completes the specified task.
- Revocability: Offers can often be withdrawn before the offeree begins performance.
- No initial promise from offeree: The offeree provides no promise or unearned income until the act is done.
How It Works
In a unilateral contract, the offeror presents a clear promise conditioned on the offeree performing a specific act. You accept the contract by completing that act, which then compels the offeror to fulfill their promise.
This structure means no mutual promises are exchanged upfront, and the contract only forms upon your performance. For example, the offeror's promise to pay is contingent on you completing the requested task, such as returning a lost item or meeting a sales goal.
Examples and Use Cases
Unilateral contracts appear in various real-world scenarios where one party incentivizes action:
- Reward offers: A public promise to pay for returning a lost pet or wallet.
- Insurance policies: Contracts where the insurer promises payment upon an event, such as an accident.
- Sales contests: Companies like Delta may offer bonuses if employees reach specific targets.
- Real estate commissions: Brokers earn fees only after successfully selling a property.
Important Considerations
When dealing with unilateral contracts, ensure the offer terms are clearly defined to avoid disputes over what constitutes acceptable performance. Since the contract forms only upon completion, partial actions may not bind the offeror unless explicitly stated.
Understanding how unilateral contracts differ from bilateral ones helps in recognizing when you have a binding agreement versus a mere invitation to perform. For instance, businesses maintain D&B ratings that may reflect their reliability in honoring such contracts.
Final Words
Unilateral contracts create binding obligations only when the specified act is fully performed, making clarity in the offer essential. Review any unilateral contract carefully to ensure the terms of performance and reward are explicitly defined before committing to action.
Frequently Asked Questions
A unilateral contract is a legal agreement where one party makes a promise in exchange for the other party completing a specific act or performance. The contract is accepted only when the offeree performs the requested action, not through a mutual promise.
Unlike bilateral contracts that involve mutual promises from both parties, unilateral contracts involve only one party making a promise, which becomes binding only when the other party completes the requested act.
Yes, the offeror can usually withdraw the offer any time before the offeree begins performance, as there is no obligation on the offeree until they start or complete the act specified.
Common examples include reward offers for lost items, insurance policies that pay out upon specific events, contests or prize offers, and real estate broker commissions paid after a sale.
For enforceability, the contract must have a clear offer with specific terms, acceptance through full performance of the act, consideration in the form of the performed act, and an intent from both parties to create legal relations.
No, unilateral contracts do not require writing. However, the performance must strictly comply with the offer’s terms to bind the offeror legally.
Acceptance happens only when the offeree completes the specified act or performance outlined in the offer, rather than through a promise or verbal agreement.
No, the offeree does not provide a promise upfront; the act of performing the requested task itself serves as the consideration that binds the contract.
