Unilateral Contract
What Does Unilateral Contract Mean?
A unilateral contract is a legally binding agreement where only one party makes a promise, and the other party is not obligated to act—unless they choose to do so. The contract becomes enforceable only when the second party performs a specific action.
Insuranceopedia Explains Unilateral Contract
Understanding Unilateral Contracts
In simple terms, a unilateral contract means a one-sided promise. The person making the offer (the offeror) commits to fulfilling their end of the bargain only if the other party (the offeree) chooses to act. However, the offeree is not legally required to take action.
This is different from a bilateral contract, where both parties are legally bound to fulfill their promises.
Common Examples of Unilateral Contracts
Insurance Policies
Insurance is a classic example of a unilateral contract. The insurance company promises to cover certain losses if you pay the premium and meet policy conditions. You’re not forced to pay or keep the policy—it’s your choice.
Rewards for Lost Items
If someone posts a notice offering “$500 for the return of my lost dog,” that’s a unilateral contract. They’re only obligated to pay if someone returns the dog. No one is required to go search for it.
Promotions or Bonuses
A company may promise a bonus to any salesperson who exceeds $100,000 in sales this quarter. That’s a unilateral contract—only those who meet the goal can claim the reward, and no one is obligated to try.
Key Characteristics of a Unilateral Contract
- One party makes a promise
- The other party performs an act, not a promise
- The contract becomes binding only upon performance
- No mutual obligation upfront
Are Unilateral Contracts Enforceable?
Yes, courts enforce unilateral contracts, but only after the action is completed. Until performance occurs, the offeror can typically revoke the offer—unless it’s stated otherwise.
Final Thoughts
To sum it up, a unilateral contract is a promise from one party, made binding only if the other party chooses to act. You’ll often see this type of contract in insurance policies, rewards, and conditional offers. Understanding the difference between unilateral and bilateral contracts can help you navigate legal agreements more confidently.
