Unilateral Contract

Definition

A Unilateral Contract is a legal concept referring to a contract in which one party makes a promise in exchange for the act of performance by another party. The key characteristic of a unilateral contract is that only one party is legally bound to fulfil the obligations stated in the contract, which becomes enforceable when the second party performs the specified act.

Examples

Real Estate Commission: A real estate broker offers a commission to any agent who successfully sells a specific property. While the broker is obligated to pay the commission upon the sale, agents are not required to accept the offer or sell the property.
Insurance Policies: Many insurance contracts are unilateral in nature. For instance, an insurance company promises to pay a specified amount in the event of an insured accident. The policyholder is not obliged to suffer an accident, but the insurance company must pay if the event occurs.
Rewards Programs: Stores or companies may offer a reward, such as a gift card, for accumulating a certain number of points or money spent. Customers are not required to make purchases, but the company must provide the reward when the purchase criteria are met.

Frequently Asked Questions (FAQs)

Q1: What differentiates a unilateral contract from a bilateral contract?

A1: In a unilateral contract, only one party makes a promise contingent upon the act of another party, without obligating the second party to act. In a bilateral contract, both parties make mutual promises to perform certain acts, binding both parties from the onset.

Q2: Can a unilateral contract be revoked?

A2: A unilateral contract can generally be revoked before the act of performance begins. However, once performance has started, the contract must be honored by the offering party.

Q3: What is an example of a situation where a unilateral contract becomes enforceable?

A3: A typical example is a reward offer for a lost pet. The person offering the reward is obligated to pay once someone finds and returns the pet. The seeker is under no obligation to search for the pet, but if they do and succeed, the reward must be given.

Q4: Are unilateral contracts common in employment scenarios?

A4: Unilateral contracts can be common in employment scenarios, such as offering a bonus for achieving certain sales targets. The employer is bound to pay the bonus, but employees are not obligated to meet the sales goal.

Q5: How are disputes in unilateral contracts typically resolved?

A5: Disputes are usually resolved through judicial proceedings where the enforceability of the contract is evaluated based on the terms and whether the required act was satisfactorily performed.

Bilateral Contract: A contract where both parties exchange mutual promises, each binding the other from the time of the agreement.
Offeror: The party who makes the offer in a unilateral contract.
Offeree: The party who performs the act in a unilateral contract.
Consideration: The compensation offered by the offeror in a contract for the act or promise made by the offeree.

Online Resources

References

Restatement (Second) of Contracts
“Principles of Contract Law” by Robert A. Hillman
“Contract Law in the Segmented States: A Unifying Theory” by Julie Levinson Werner

Suggested Books for Further Studies

“Contract Law: Selected Source Materials Annotated” by Steven J. Burton and Melvin A. Eisenberg
“Foundations of Contract Law” by Richard Craswell and Alan Schwartz
“Cases and Materials on Contract Law” by Edward J. Murphy and Richard E. Speidel

Real Estate Basics: Unilateral Contract Fundamentals Quiz

### What characterizes a unilateral contract? - [ ] Both parties are bound to perform actions. - [x] Only one party makes a promise conditioned on the other party's performance. - [ ] Neither party shares any obligations. - [ ] Both parties give mutual consideration. > **Explanation:** In a unilateral contract, only one party is bound to perform an action if the other party chooses to perform what has been promised. There is no mutual exchange of binding promises at the outset. ### Can a unilateral contract be revoked after performance has commenced? - [x] No - [ ] Yes - [ ] Only if mentioned in terms - [ ] Maybe > **Explanation:** Once the offeree starts performing, the offer cannot be revoked, ensuring that the offeree can complete the act and secure the promised reward. ### Which scenario represents a unilateral contract? - [x] Offering a reward for finding a lost item. - [ ] A loan agreement. - [ ] Renting an apartment. - [ ] A sales contract. > **Explanation:** Unilateral contracts are exemplified by scenarios like offering a reward for finding a lost item, where only one party promises to give something upon completion of a task by another party. ### What primary aspect differentiates bilateral from unilateral contracts in real estate? - [ ] The size of the contract - [x] The involvement of mutual obligations - [ ] Location of the property - [ ] Closing date > **Explanation:** Bilateral contracts involve mutual obligations where both parties are bound by promises. Unilateral contracts, conversely, involve one party making a promise contingent upon the other party's act. ### Who is the "offeree" in a unilateral contract? - [ ] The party making the promise - [x] The party capable of performing the act - [ ] Any concerned third party - [ ] None of the above > **Explanation:** In a unilateral contract, the offeree is the party who can perform the specific act required to enforce the promise made by the offeror. ### Are reward offers considered unilateral contracts? - [x] Yes - [ ] No - [ ] Sometimes - [ ] Only in specific regions > **Explanation:** Reward offers are classic examples of unilateral contracts, where the reward giver promises to pay upon the act of finding a lost item or satisfying the terms of the reward. ### Which is NOT a characteristic of a unilateral contract? - [ ] One-side bound to a promise - [ ] Conditional upon an act - [x] Mutual obligations - [ ] Act by another party > **Explanation:** Unilateral contracts lack mutual obligations; only one party is active in terms of a promise, contingent upon the other party's action. ### What makes a unilateral contract enforceable? - [ ] Both parties signing the document - [ ] Legal representation - [x] Completion of the required act - [ ] Verbal agreement > **Explanation:** A unilateral contract is enforceable once the offeree completes the required act stipulated in the offer. ### How can a unilateral contract be created in real estate? - [ ] Offering exclusive listings - [x] Promising a bonus for achieving sales targets - [ ] Signing a lease agreement - [ ] Applying for a mortgage > **Explanation:** A unilateral contract in real estate can be created when a bonus is offered for achieving certain sales targets without obligation from the salespeople until the targets are met. ### Who offers consideration in a unilateral contract? - [x] The offeror - [ ] The offeree - [ ] Both parties equally - [ ] The government > **Explanation:** The offeror provides the consideration (reward, bonus, etc.) for the act performed by the offeree, making the unilateral promise conditional upon this performance.