Introduction

When it comes to contracts, not all agreements work the same way. One type you might hear about in business or legal settings is a unilateral contract. Unlike the more common bilateral contracts, where both sides make promises, a unilateral contract involves a promise from one party in exchange for an action by another.

Let’s dig into what unilateral contracts are, how they operate, and where you might see them in real life.

Read: How long do NDAs last?

Understanding unilateral contracts

A unilateral contract is an agreement where one person (the offeror) makes a promise that only takes effect if the other person (the offeree) does something specific. The key point is that only the offeror has to do anything, and only if the offeree chooses to take that action.

A common example of a unilateral contract is a reward offer. For instance, if someone says, "I’ll pay you $500 if you find my lost dog," they are making a unilateral offer. The person offering the $500 isn’t bound to pay unless someone actually finds and returns their dog. The person looking for the dog isn’t under any obligation to search, but if they do and succeed, the offeror must follow through on their promise to pay.

Key elements of a unilateral contract

Usually, a unilateral contract is made up of the following:

• Clear offer: The person making the offer (the offeror) has to clearly say what they’re promising to do if the other person (the offeree) completes a specific action. The terms need to be straightforward, so there’s no confusion about what’s being offered.

• Performance as acceptance: In a unilateral contract, the offeree doesn’t accept the offer by promising to do something; they accept by actually doing it. Until they perform the action required, they aren’t legally bound to anything.

• No contract until action: There is no binding contract until the offeree completes the action specified in the offer. This means the offeror can’t demand anything or enforce the contract until the task is done.

• Can’t revoke once action starts: Once the offeree begins to perform the action, the offeror usually can’t take back the offer, especially if the offeree has already made significant efforts based on the offer.

Read: What’s a non-compete clause and should I have one in my business contract?

Examples of unilateral contracts

Unilateral contracts pop up more often than you might think, even outside the world of missing pets:

• Rewards: Think of a public reward for returning lost property or providing information leading to an arrest. No one is obligated to search for the lost item or provide information, but if they do and meet the terms, the reward must be paid.

• Insurance contracts: Many types of insurance contracts are unilateral. For example, your car insurance company agrees to pay for damages if you have an accident, but you’re not promising to have an accident—you’re just paying your premiums.

• Contests and giveaways: When a company offers a prize for the best essay, photo, or another contest entry, that’s a unilateral contract. The company is only bound to award the prize if someone submits the winning entry.

What’s the difference between a unilateral and a bilateral contract?

To understand unilateral contracts better, it helps to compare them to bilateral contracts, which are more common. In a bilateral contract, both sides make promises—like in a typical sales agreement where one party agrees to deliver goods and the other agrees to pay for them. But in a unilateral contract, only one side makes a promise, while the other is free to decide whether or not to take action. See? Simple.

Enforceability of unilateral contracts

Something that’s different about unilateral contracts is how they’re enforced. Since the contract only comes into effect when the offeree performs the requested action, there’s no binding agreement until that happens. However, once the act is done, the offeror is legally bound to fulfill their promise. If they fail to do so, they could face legal consequences.

For instance, if someone offers a reward for information leading to an arrest and then refuses to pay after someone provides that information, the person who provided the information could sue for breach of contract.

Read: How can I amend a contract after signing?

Tips for creating a unilateral contract

• Be clear and specific: Make sure the terms of what you’re offering and what you expect in return are clearly outlined. Ambiguity can lead to disputes.

• Consider revocability: Understand when and how you can revoke the offer, and be mindful that once someone starts performing the requested act, it may become irrevocable.

• Document everything: Keep a clear record of the offer, the terms, and any communication with the offeree to protect yourself in case of any disputes.

How Cobrief can help with contract review

Reading your business contracts can feel overwhelming as an owner-manager of a small to medium-sized business. That’s where Cobrief comes in. Cobrief helps business owners and operators review their business-to-business contracts for legal risks.

Upload your contract to Cobrief's AI contract review software, click review and you’ll get a list of all the risks, in plain English. This helps you decide whether to sign, negotiate or reject the terms of your contract, or hire a lawyer. Think of it as a heat map for your contracts.

Get started here.

Conclusion

Unilateral contracts may seem less common than bilateral ones, but they are all around us, from reward offers to everyday insurance agreements. Understanding how unilateral contracts work can help you recognize them in your personal and business dealings and use them effectively when necessary.

Always ensure that the terms are clear and consult a legal professional if you’re ever unsure about the enforceability of such agreements. With a bit of knowledge and attention to detail, you can navigate unilateral contracts with confidence.

How Cobrief can help with contract review

Reading your business contracts can feel overwhelming as an owner-manager of a small to medium-sized business. That’s where Cobrief comes in. Cobrief helps business owners and operators review their business-to-business contracts for legal risks.

Upload your contract to Cobrief's AI contract review software, click review and you’ll get a list of all the risks, in plain English. This helps you decide whether to sign, negotiate or reject the terms of your contract, or hire a lawyer. Think of it as a heat map for your contracts.

Get started here.