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Unilateral Contract | Definition | Example

Unilateral Contract

Unilateral Contract Definition | Unilateral Contract

A unilateral contract is a contract agreement in which an offeror promises to pay after the occurrence of a specified act. In general, unilateral contracts are most often used when an offeror has an open request in which they are willing to pay for a specified act. Insurance policy contracts are also partially unilateral. In a unilateral contract, the offeror is the only party with a contractual obligation.

Contract arising where one party (the promisor) makes an offer to pay another party (the promisee) in return for the performance of an act, and the promisee gives his or her assent by performing the said act. A reward offered for providing certain information is an example of a unilateral contract.

Unilateral Contract
Unilateral Contract

Unilateral Contract Example

Unilateral contracts are primarily one-sided without a significant obligation from the offeree. Open requests and insurance policies are two of the most common types of unilateral contracts.

Open Requests

In the open economy, offerors may use unilateral contracts to make a broad or optional request which is only paid for when certain specifications are met. If an individual or individuals fulfill the specified act, the offeror is required to pay. Rewards are a common type of unilateral contract request. In criminal cases, a reward may be available for important information provided about the case. Reward funds can be paid to a single individual or several individuals offering information that meets specified criteria.

A unilateral contract could also involve an open request for labor. An individual or company could advertise a request that they agree to pay for if the task is completed. For example, Keith could advertise to pay $2000 for safely moving his boat into storage. If Carla responds to the advertisement and takes the boat into storage then Keith would have to pay $2000.

Unilateral Contract Example
Unilateral Contract Example


Insurance policies have unilateral contract characteristics. In the case of an insurance contract, the insurer promises to pay if certain acts occur under the terms of a contract’s coverage. In an insurance contract, the offeree pays a premium specified by the insurer to maintain the plan and receive an insurance allotment if a specified event occurs. Insurance companies use statistical probabilities to determine the reserves they need to cover the payouts of the clients they insure. Some insurance cases may never include an occurrence leading to liability by the insurer while extreme cases require the insurance company to pay out large sums of money for an occurrence covered under a client’s insurance plan.

Unilateral Vs Bilateral Contract

Contracts can be unilateral or bilateral. In a unilateral contract, only the offeror has an obligation. In a bilateral contract, both parties agree to an obligation. Typically, bilateral contracts involve equal obligation from the offeror and the offeree. In general, the primary distinction between unilateral and bilateral contracts is a reciprocal obligation from both parties.

What is a bilateral contract?

When most people think of contracts, bilateral agreements come to mind. In its most basic form, a bilateral contract is an agreement between at least two people or groups. Most business and personal contracts fall into this category.

Examples of bilateral contracts are present in everyday life. You’re entering this type of agreement every time you make a purchase at your favorite store, order a meal at a restaurant, receive treatment from your doctor or even checkout a book at your library. In each circumstance, you’ve promised a certain action to another person or party in response to that person or party’s action.

What is a unilateral contract?

The easiest way to understand unilateral business contract is by analyzing the word ‘unilateral.’ In its simplest terms, unilateral contracts involve an action undertaken by one person or group alone. In contract law, unilateral contracts allow only one person to make a promise or agreement.

You might see examples of unilateral contracts every day, too; one of the most common instances is a reward contract. Pretend you’ve lost your dog. You place an advertisement in the newspaper or online offering a $100 reward to the person who returns your missing pooch. By offering the reward, you’re offering a unilateral contract. You promise to pay should anyone fulfill the obligation of returning your dog. You’re the only person who has taken any action in this contract, as no one is specifically responsible or obligated to finding your dog passed on this interaction.

Another common example of a unilateral contract is with insurance contracts. The insurance company promises it will pay the insured person a specific amount of money in case a certain event happens. If the event doesn’t happen, the company won’t have to pay.

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