Unilateral and Bilateral Contracts - Explained
Promise for a Promise or Promise for Action
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What is a Bilateral Contract?
A bilateral contract consists of two promises between individuals that form a contract. Specifically, one party makes a promise to another party that she will do something (or forgo doing something) in exchange for the other party's promise to do something (or promise to forgo doing something).
- Example: Eric promises to wash Julia's car if she promises to pay him $20. The both activities will occur at some point in the future, so you have two promises of future performance.
What is a Unilateral Contract?
A Unilateral contract is an agreement with only one promise. That is, one party promises a future action if the other party performs whatever is requested of her. The promising party does not want a return promise. As such, a contract is formed or comes into exists once the other party begins to perform the requested services.
- Example: Suppose Eric tells Julia that he will pay her $20 if she washes his car. Eric does not want a promise to wash the car. Julia can accept Erics offer by beginning to wash his car. Julia is not obligated to wash the car unless or until she begins doing so. Further Eric is not obligated to pay Julia until she begins washing the car.
- Note: The common characteristic between unilateral and bilateral contracts is that it entails a promise of performance and a demand from the offeree. This is critical to the requirement that a contract contain an offer, acceptance, and exchange of value.
Next Article: Express vs Implied Contracts Back to: CONTRACT LAW
Why do you think it is important to distinguish and recognize these two types of contracts? Do you think each type of contract is more applicable in either sales of goods or services? Why or why not?
Jennifer is looking for someone to paint her house. She sends out an email to several painters in the neighborhood that she has purchased the paint and will pay $3,000 to anyone who paints her house. She also includes some detailed requirements for the painting process and states that project must be completed by the coming weekend. Rob shows up the next morning with all of his equipment and ready to paint. Is there a contract in this situation? Why or why not?
- Yes, there is a valid contract. This is an example of a unilateral contract. A unilateral contract is a contract that arises out of an offer made by one party to another with the promise to compensate the other person once there is performance of an obligation. This happens when one party makes an open request and the other person performs the request. It is not necessary that the party performing the request make a promise to do so prior to beginning performance.. The performance of the request is enough to make it a valid contract. The promise to pay or compensate the party for doing the obligations also an important aspect of a unilateral contract. In the example, Jennifer established a unilateral contract the moment she made an offer for the painting job and promised to pay whoever would show up to do the job. Rob showing up to do the job is acceptance of the offer made by Jennifer. However, the contract will only be completely performed once Rob does the painting job and Jennifer compensates him.
- What is a Unilateral Contract vs a Bilateral Contract?
- What is an Express Contract vs an Implied Contract?
- What are the requirements to form a Contract (Offer, Acceptance, Consideration)?
- What is an Enforceable Contract vs. a Valid Contract?
- What is a Void Contract vs a Voidable Contract?
- Adhesion Contract
- What is Mental Capacity to contract?
- What is the requirement of a Lawful Purpose?
- What are common types of Voidable Contract?
- When does an offer to contact terminate?
- Counterparty Definition
- Mirror Image Rule?
- Rule for Sale of Goods
- Silence is Not Acceptance?
- Mailbox Rule
- Shrink-wrap Agreement Definition
- Click-Wrap Agreement Definition
- What is Consideration?
- What is Promissory Estoppel?
- When is a contract required to be in writing Statute of Frauds?
- What type of writing satisfies the statute of frauds?
- Exceptions to the Statute of Fraud
- Documents Under Seal
- Who Can Sign Contracts on Behalf of a Company?
- E-Sign Act
- Privity of Contract
- Who are third-party beneficiaries to a contract?
- What is assignment and delegation of a contract?
- What is Performance, Substantial Performance, and Breach of a contract?
- What is performance of a Divisible Contract?
- When is a party's duty of performance discharged?
- What is tender performance of a contract?
- What are Impossibility and Impracticability
- What is a Frustration of Purpose?
- Acceleration Clause (Contracts) Definition
- What is Efficient Breach?
- Organization of a Contract
- Contract Representations & Warranties
- Contract Covenants
- What rules does a court follow in interpreting a contract?
- What is the Parol Evidence Rule?
- What is a complete integration vs a partial integration?
- Exceptions to the Parol Evidence Rule
- Patent and Latent Ambiguity in a Contract
- Service Level Agreement Definition
- Offtake Agreement