What is a unilateral contract?
A unilateral contract is a contract where only one person makes a promise. A unilateral contract is distinguished from a bilateral contract, where there is a mutual exchange of promises (each party to the contract makes a promise). In order for a unilateral contract to be considered legally enforceable, the promise must be considered an offer and it must be accepted.
Unilateral Versus Bilateral Contracts
Contracts are agreements negotiated between two parties that become legally enforceable. When one of the parties to a contract fails to do what he or she agreed to do, the other can sue for breach of contract and the court will award actual damages to the wronged party.
In order for a contract to be legally binding, the two parties to the contract must have exchanged something of value. In other words, each party must have done something, or given something up. In a bilateral contract, the things of value that are exchanged come in the form of mutual promises. For instance, Kyle might promise to walk Joe's dog, and Joe might promise to pay Kyle $100 in exchange for the dog walking service.
In a unilateral contract, however, only one party makes a promise. The binding contract is not created by this promise alone, but instead comes into existence when the other party does an act or abstains from doing an act because of the promise.
In a unilateral contract, Kyle might promise $100 in exchange for Joe walking his dog. This is different from Kyle promising to pay $100 and Joe promising to walk the dog. In the first example, Kyle and Joe both made a promise; creating a bilateral contract. In the second example, Kyle made a promise but Joe did not. The only way that a binding contract will be formed here is if Joe walks the dog because of Kyle's promise. Joe doesn't have to walk the dog at all if he does not want to. If Joe does not walk the dog, Kyle has no obligation. When Joe picks up the leash and goes for a walk, however, Kyle becomes bound by the contract and has to pay for the service.
Unilateral Contract Requirements
Not every promise that is made has the potential to create a unilateral contract. The promise must be an express promise. It must clearly offer something of value in exchange for another party doing something (or not doing something). If Kyle simply said to Joe: "I promise to give you $100", this would not create the potential for a unilateral contract since there is no act or omission required on Joe's part to receive the $100.
Because the promise must offer something of value in exchange for an act or omission, the person who makes the promise in a unilateral contract is generally referred to as the offeror. The offer also has to specify how the offer is to be accepted. The other party who has the chance to accept is referred to as the offeree.
The offerree has no obligation to act at all (Joe doesn't have to walk Kyle's dog). The offerree therefore has the power of acceptance. If the offeree chooses to exercise that power and do what was requested (thereby accepting the offer), then a binding contract is formed.
Examples of Unilateral Contracts
There are many different examples of unilateral contracts. One common type is the offer of a reward. An offeror might, for instance, offer a $200 reward if his lost dog is returned safely. No one is obligated to return his dog, so no contract is created by the making of this offer. However, it is an express promise and it is clear how someone can accept to create a binding contract: someone can bring back the dog.
If someone does indeed return the dog, then the offer has been accepted and a legally binding contract is created. The dog owner thus has the obligation to pay the $200 reward and the finder of the dog could file a lawsuit if the dog owner failed to do so.
Getting Legal Help
In some cases, it can be a challenge to determine whether an express promise or offer was made. It can also be tricky to determine whether the offer was or was not accepted. As such, anyone who has concerns about a unilateral contract should consult with an experienced contract law attorney for guidance and advice.