Definition 

What are Unilateral Contracts vs Bilateral Contract Agreements ? Definition & MeaningUnilateral contracts are vastly different than bilateral contracts. The elements of a contract are previously discussed in our Contracts article.  There are two main types of contracts: bilateral and unilateral.

A Promise for Performance. As comparing unilateral vs bilateral contract differences, a bilateral contract constitutes a promise for a promise. On the other hand, a unilateral agreement constitutes a promise for performance.

For example, if an individual promises to pay money to the band in exchange for a band’s promise to perform at a party, this contract is unilateral.

Whereas, if an individual promises to pay money to a band in exchange for the band’s performance at a party, this amounts to a unilateral contract. As the above example illustrates, the difference between unilateral contracts and bilateral contracts can be subtle, but there are several distinguishing features.

Bilateral vs Unilateral Contracts?

What is the difference between bilateral and unilateral contracts? A unilateral agreement is where one party offers and the other party accepts by performing. Conversely, a bilateral contract is one in which requires both sides to give a promise to each other. The best way to distinguish between a unilateral contract and bilateral contracts is to look to see who is offering what and whether both sides have to perform versus only one.

In a unilateral contract, the offeror will simply pay for performance. In a bilateral agreement, each offeror has to do something.

Regardless of the type of contract, whether unilateral or bilateral contracts, you should always seek to get your agreement in writing and understand the available breach 0f contract remedies. Without a written document, attorneys will have twice as much difficulty in litigation.

What are Distinguishing Features of a Unilateral Contract?

  • Promise in exchange for Performance
  • Minimal/No Negotiation
  • Only one party is legally bound
  • Cannot revoke offer
  • No Acceptance is required
  • May not have a specified recipient 

Minimal/No Negotiation.  The first feature, a promise in exchange for performance, is discussed above.  In a unilateral agreement, there is typically little or no negotiation between the parties to the contract.  Another type of unilateral contract right occurs in a government contract termination for convenience.

Alternatively,  bilateral contracts are more common because they allow the parties to set mutually agreed upon terms, such as (to continue the previous example) the band playing for a set number of hours or a particular genre of music. On the other hand, in a unilateral agreement the requirements are typically exclusively set by the promising/offering party.

A promise to pay a reward upon return of a lost credit card is a unilateral contract.  The promising party can promise to pay the reward only if the credit card is returned by the following Friday.

If the promising party conditions the promise on the return by a particular date, then the unilateral agreement is not enforceable unless the requirement is met.  Note that this contract did not involve any negotiation among the parties, but instead the promising party has set any/all requirements.

Only the Promising Party is Bound. By the same token, only the promising party is bound.  When an individual promises to pay a reward for the credit card, or say, a lost dog, nobody becomes legally bound to find the credit card or dog.  However, once the dog or credit card is found, the promising party is legally obligated to pay that reward.

No Acceptance Required. When the pet owner loses the family dog, nobody has to say “I accept” your offer to find your pet or to send back a contract.  The contract is enforceable upon performance – e.g. return of the pet.

Advertisements.  Advertisements with specific requirements, such as selling televisions at a particular price to the first ten customers, can create a unilateral contract that binds the company making to fulfill its promise to sell the television at a price to the individuals that perform (arrive as the first ten customers).

Inability to Revoke Offer.  In one court case that evaluated the presence of a unilateral agreement, a woman sent a letter to her son-in-law promising she would transfer ownership of her property to him upon her death if he came to stay with her and care for her during her life. 

The son-in-law moved out of state to her house to take care of her. After several weeks, discord arose between the two and the woman instead transferred the property to her own son. The son-in-law (plaintiff) sued the woman and her son (defendants) to obtain possession of the property.

The son-in-law moved out of state to her house to take care of her. After several weeks, discord arose between the two and the woman instead transferred the property to her own son. The son-in-law (plaintiff) sued the woman and her son (defendants) to obtain possession of the property.

The court upheld the enforcement of her promise as a unilateral agreement and ordered the woman to transfer the property to the son-in-law. Because the performing party (the son-in-law) had taken a significant step at performing, the promising party could not rescind her offer to transfer the property.

As this case illustrates, the consequences of entering into this type of contract can be severe, such as the transfer of property, and the distinctions between advertisements and creating a legally binding unilateral contract can be subtle. See information about breach of contract defenses.

Understand Your Rights -- Get a Free Copy of Your Breach of Contract Checklist

To further discuss disputes with unilateral vs bilateral contracts, advertising issues or bilateral contract disputes, contact an experienced Colorado contract lawyer. Call for a FREE Initial Consultation at 1-866-601-5518 or in Denver 720-941-7200.

2 comments on “What are Unilateral vs Bilateral Contract Agreements?

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>