What is a unilateral contract?

Learn what the term unilateral contract means with this easy, go-to guide to deciphering and defining specific contract terminology.

Whether or not you’ve actually created contracts before, you probably already know how important they are when it comes to taking care of business. But with confusing terminology and the sheer number of different types, finding the best contract for you can be tough.

That’s why we’re diving into a quick explanation of a common type of agreement — unilateral contracts. Read on to learn more about what they are, why they matter, and the top three things you need to know about them.

What is a unilateral contract agreement?

A unilateral contract — unlike the more common bilateral contract — is a type of agreement where one party (sometimes called the offeror) makes an offer to a person, organization, or the general public. In order for the offeree to receive whatever the offeror promises, they need to perform the act or service that was requested in the agreement.

A bilateral contract contains set agreements and promises between two parties whereas, in a unilateral contract, there are no promises between parties. Instead, the offeror requires that the offeree perform an act, meet a request, or provide a service.

Examples of unilateral contracts.

There are many different situations which may call for a unilateral contract.

A common example could be a contract for a certain type of labor, such as sales. Salespeople may be eligible for rewards or bonuses if they reach a certain degree of success — generally shown by their conversion rate. Their contract for employment outlines this, promising a certain amount of payment or benefit once that threshold has been reached.

You might also see this in your hotel stay agreements for your next trip. As a guest, you won’t be charged any sort of fee if you leave the room in a presentable condition. However, if anything breaks, you may be charged a courtesy fee as outlined in your contract.

What you should know about unilateral contracts.

• Unilateral contracts are just as binding as bilateral contracts, but only one party is making a promise.
• The only way to accept a unilateral contract is through the completion of a task.
• An offeree has no obligation to perform the act in the unilateral agreement.
• To have a legally binding unilateral contract, you must have mutual agreement and intention. You also must have certainty, which happens when everyone understands the contract terms.
• The element of legal consideration in the context of a unilateral contract defines whatever form of payment you both have agreed to using.

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