What are Unilateral Contracts? Definition

Unilateral contracts are those in which only one party to the contract is bound to perform. In return for this performance, the other party promises something of value. The most common type of unilateral contract is a reward offered for finding a lost item. Other examples of unilateral contracts include employment agreements, life insurance policies, and leases. A unilateral contract can be either written or oral, but it must be clear that only one party is obligated to perform.

What is a Unilateral Contract?

A unilateral contract is a binding agreement between two parties where only one party is obligated to perform. The other party is not required to do anything in return for the first party’s performance. This type of contract is often used in business transactions, such as when a company contracts with another company to provide goods or services.

The Different Types of Unilateral Contracts

There are four different types of unilateral contracts: option contracts, output contracts, requirements contracts, and exclusive dealing contracts.

Option Contracts: An option contract is a type of unilateral contract in which one party agrees to provide the other party with the option to purchase goods or services at a specified price within a certain period of time.

Output Contracts: An output contract is a type of unilateral contract in which one party agrees to sell all of the goods or services that it produces to the other party during a specified period of time.

Requirements Contracts: A requirements contract is a type of unilateral contract in which one party agrees to purchase all of the goods or services that it requires from the other party during a specified period of time.

Exclusive Dealing Contracts: An exclusive dealing contract is a type of unilateral contract in which one party agrees to sell its goods or services only to the other party, or not to sell its goods or services to any other party, during a specified period of time.

The Advantages and Disadvantages of Unilateral Contracts

A unilateral contract is a contract in which only one party makes a promise to another. The advantage of such a contract is that it is relatively simple to create and does not require the mutual agreement of two parties. The disadvantage of unilateral contracts is that they may not be legally binding, depending on the jurisdiction, and they may be more difficult to enforce than bilateral contracts.

How to Draft a Unilateral Contract

When parties to a contract are not in equal bargaining positions, it may be necessary for one party to make a binding agreement to perform an act, while the other party remains free to accept or reject that offer. This is called a unilateral contract.3

To create a unilateral contract, one party must make an offer that is clear and definite, and the other party must accept the terms of the offer by performing the requested act. For example, if you offer to pay someone $100 to mow your lawn, and they agree by actually mowing your lawn, you have created a unilateral contract.4

It’s important to note that offers made through advertisements are generally not considered binding offers that would create a unilateral contract.5 So, if you see an advertisement for a “free trial” of a product, with no strings attached, don’t assume that you’re obligated to purchase the product once the trial period is over.

Conclusion

A unilateral contract is a type of contract in which only one party makes an offer and the other party accepts it. This type of contract is usually used in business transactions, where one party offers goods or services to another party in exchange for something of value. Unilateral contracts can be either written or oral, but they must be accepted by the other party in order to be legally binding.