What is a unilateral contract?

Explainer
October 10, 2022
min

When we think of contracts, we think of two or more parties making (and fulfilling) a promise to one another. But not all contracts look like this. Some contracts are unilateral. 

What actually is a unilateral contract, though? And when are they used? Find out in this Juro explainer. 

Unilateral contract definition

Unilateral contracts involve only one person or group – called the ‘offeror’ – making a promise to do something.

A good example of a unilateral contract is if you, for example, lose your dog (sorry). You put an ad in the local paper with a reward for anyone who returns Rover to you.

By offering that cash, you’re offering a unilateral contract. It doesn’t put an obligation on anyone to do anything except you – you’re promising to pay an amount of money to someone who brings your beloved family pet home. 

Otherwise, a unilateral contract is a contract like any other, containing the key elements of a contract, subject to the same consequences in case of a breach of contract, and so on.

Unilateral contract examples

To make the distinction between unilateral and bilateral contracts clearer, let’s discuss some common examples of unilateral contracts, and how they’re different. 

Insurance contracts are one example of a unilateral contract. When you take out, say, home insurance, the company promises to pay you a specific amount of money if something happens to your home. If the fire or flood or plague of locusts (or similar) doesn’t happen, they don’t have to pay.

That means that the agreement is potentially one-sided, making it a unilateral contract rather than a bilateral one. That is why many aleatory contracts are also unilateral contracts. 

One of the most famous examples of a unilateral contract is the agreement within the Carlill v. Carbolic Smoke Ball Co. case. In this example, Carbolic Smoke Ball Co advertised their products and claimed that they were capable of curing colds. 

To prove it, they made a unilateral offer to pay any individual that disproved the product’s effectiveness a certain sum of money. The offer could be accepted by anyone that performed the terms, but Carlill, who used the product and found evidence of its ineffectiveness, was not obligated to act under the contract. This meant that the contract was a unilateral one, so long as there was found to be both offer and acceptance. 

Why are unilateral contracts useful?

Unilateral contracts are a convenient way to advertise rewards or put out an open request to receive help from others. This is because unilateral contracts don’t automatically require those that receive the offer to perform an obligation under the contract. This, in turn, makes the offer more attractive to potential promisees and enables the offer to be extended to a larger group of people. 

Given this convenience, unilateral contracts are an effective way to publicize a business activity or promote a reward you’re offering in return for help within the community. 

How are unilateral contracts different from other contracts?

The biggest difference between a unilateral contract and a bilateral contract is that a unilateral contract will involve a one-sided offer. To explore this distinction in more detail, check out this explanation of the differences between unilateral and bilateral contracts

Are unilateral contracts enforceable?

So long as a unilateral contract fulfills the various elements of a contract, it can be deemed enforceable. This means that, if the contract meets these requirements, the parties will be bound by it. 

Take, for example, the case of the lost dog we discussed earlier. If a promisee takes the owner of the lost dog up on their offer to find the dog in exchange for a reward, the terms can be binding.

If a member of the community does find the dog and return it to the owner in line with the terms specified in the offer, the owner will be obligated to pay the individual that returned the dog. If they fail to make this payment or refuse to pay, there can be a breach of contract.

Therefore, unilateral contracts are capable of being legally enforceable, just like bilateral contracts. 

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