Definition
A unilateral contract is a type of agreement in which one party (the offeror) makes a promise to perform a certain act provided the other party (the offeree) either performs the act requested or refrains from performing an action. The contract becomes binding once the offeree performs the act specified in the offer. This contrasts with a bilateral contract, where both parties exchange mutual promises.
Examples
- Reward Offer: A common example is a reward contract, where a person offers a reward for the return of a lost item. The offeror is obligated to pay the reward once someone returns the item.
- Insurance Contracts: Many insurance contracts operate unilaterally. The insurance company agrees to pay for certain losses (like damage to a car) if the insured party pays the premiums and meets the conditions outlined in the policy.
- Contests: In contests, the sponsor might offer a prize for the performance of a certain task (e.g., winning a race). Only the actual performance of the task can claim the reward.
Frequently Asked Questions (FAQs)
What is the main difference between a unilateral and a bilateral contract?
A unilateral contract involves a promise in return for a specific act, while a bilateral contract involves mutual promises between two parties.
When does a unilateral contract become binding?
A unilateral contract becomes binding when the offeree begins performance of the act or completes the act as specified by the offeror.
Can a unilateral contract be revoked?
A unilateral contract can generally be revoked by the offeror at any time before the offeree begins performance. However, once the offeree has commenced performance, the offeror typically cannot revoke the contract.
What happens if the offeree partially performs?
In many jurisdictions, once the offeree has started performance, the offeror cannot revoke the offer, and the offeree may have a reasonable timeframe to complete the performance.
Related Terms
- Bilateral Contract: An agreement in which both parties make promises to each other.
- Offeror: The party who makes an offer in a contract.
- Offeree: The party to whom an offer is made in a contract.
- Performance: The act(s) required by the contract or agreement.
- Consideration: Something of value given by both parties to a contract that induces them to enter into the agreement.
Online References
Suggested Books for Further Studies
- “Contract Law for Dummies” by Scott J. Burnham
- “Fundamentals of Contract Law” by Melvin A. Eisenberg
- “Principles of Contract Law” by Steven J. Burton
Fundamentals of Contract Law: Contract Basics Quiz
### What is a unilateral contract?
- [ ] An agreement where both parties make mutual promises.
- [x] An agreement where one party makes a promise in return for an act.
- [ ] A legal promise enforceable without consideration.
- [ ] A contract enforceable by a court order.
> **Explanation:** A unilateral contract involves one party making a promise contingent upon the actual performance of an act by another party.
### Why is a reward for finding a lost item a good example of a unilateral contract?
- [x] Because the promise of the reward is given in exchange for the act of returning the lost item.
- [ ] Because it involves two parties making mutual promises.
- [ ] Because it does not involve any consideration.
- [ ] Because it requires no action from the offeree.
> **Explanation:** A reward for finding a lost item is a promise made by the offeror, binding only when the act of finding and returning the item is completed.
### In a unilateral contract, when does the offer become irrevocable?
- [ ] When the offeror expresses the intention to keep the offer open.
- [x] When the offeree begins performance of the act.
- [ ] When the offer is published.
- [ ] When parties sign a written agreement.
> **Explanation:** In many jurisdictions, once the offeree begins performance of the act specified in the offer, the offeror cannot revoke the offer.
### Can a unilateral contract be enforced if only part of the act is performed?
- [x] Generally, yes, the offeror cannot revoke the offer once performance has started.
- [ ] No, unless the act is completed in full.
- [ ] Only if the offeree agrees to an extension.
- [ ] Only if a guarantee is provided.
> **Explanation:** Once the offeree commences performance, the offeror typically cannot revoke the offer, making the contract enforceable.
### What constitutes the acceptance of a unilateral contract offer?
- [ ] A verbal agreement from the offeree.
- [ ] The signing of a formal document.
- [x] The completion of the act specified in the offer.
- [ ] An email confirming intent to perform.
> **Explanation:** Acceptance of a unilateral contract is performed through the offeree’s completion of the specified act.
### Who can make a unilateral contract offer?
- [x] Any individual or entity making a promise in return for an act.
- [ ] Only businesses.
- [ ] Only individuals.
- [ ] Only governments.
> **Explanation:** Any individual or entity can make a unilateral contract offer as long as a promise contingent upon an act is established.
### Is an insurance contract typically a unilateral contract?
- [x] Yes, because the insurer promises to pay for losses in exchange for premium payments and adherence to policy conditions.
- [ ] No, because mutual promises are always required.
- [ ] Yes, because it involves enforceable duties.
- [ ] No, because they are government regulated.
> **Explanation:** Insurance contracts are unilateral as the company agrees to pay for certain losses conditioned on payment of premiums and adherence to policy terms.
### What must the offeree do to accept a unilateral contract?
- [ ] Sign an official document.
- [ ] Make a counteroffer.
- [x] Perform the act specified by the offer.
- [ ] Enter into negotiation.
> **Explanation:** The offeree must complete the specific act outlined in the offer to accept a unilateral contract.
### In the context of contract law, what is ‘consideration’?
- [ ] The signing of the contract.
- [ ] A negotiation period.
- [x] Something of value exchanged between the parties.
- [ ] A verbal promise.
> **Explanation:** Consideration involves something of value exchanged by both parties to motivate them to enter the contract.
### How does a unilateral contract create obligations?
- [ ] Through mutual promises.
- [x] By the offeror's promise contingent upon an act performed by the offeree.
- [ ] Through government enforcement.
- [ ] Via notarized documents exclusively.
> **Explanation:** A unilateral contract creates obligations based on the offeror's promise contingent upon the completion of an act by the offeree.
Thank you for exploring the essential topic of unilateral contracts and challenging yourself with our quiz! Continue deepening your understanding of contract law.
