Key Differences Between Unilateral and Bilateral Contracts to Know for Contracts

Unilateral and bilateral contracts are two fundamental types of agreements in law. Unilateral contracts involve one party's promise in exchange for an act, while bilateral contracts consist of mutual promises between two parties, creating reciprocal obligations. Understanding these differences is crucial in contract law.

1. Definition of unilateral contracts

   • A unilateral contract involves a promise made by one party in exchange for an act by another party.
   • The offeror is bound to fulfill their promise only when the offeree completes the requested act.
   • Commonly seen in reward situations, where one party offers a reward for a specific action.

2. Definition of bilateral contracts

   • A bilateral contract consists of mutual promises between two parties, where each party commits to fulfilling their obligations.
   • Both parties are bound to perform their respective promises, creating a reciprocal relationship.
   • Most contracts in business and personal transactions are bilateral.

3. Key differences between unilateral and bilateral contracts

   • Unilateral contracts involve one-sided promises, while bilateral contracts involve mutual promises.
   • In unilateral contracts, acceptance occurs through performance; in bilateral contracts, acceptance occurs through a promise.
   • Revocation rules differ: unilateral offers can be revoked before performance, while bilateral offers cannot be revoked once accepted.

4. Examples of unilateral contracts

   • A reward for finding a lost pet: the offeror pays the reward only if the pet is found.
   • A contest where participants must complete a task to win a prize.
   • Insurance policies where the insurer promises to pay upon the occurrence of a specified event.

5. Examples of bilateral contracts

   • A sales agreement where one party agrees to sell a car and the other agrees to pay a specified price.
   • Employment contracts where an employee agrees to work in exchange for a salary.
   • Lease agreements where a landlord promises to provide housing in exchange for rent.

6. Formation of unilateral contracts

   • Formed when one party makes a clear offer that can be accepted only through performance.
   • The offer must be communicated to the offeree, who must be aware of the offer before performing the act.
   • No acceptance is required until the act is completed.

7. Formation of bilateral contracts

   • Formed when both parties exchange promises, creating mutual obligations.
   • The offer must be clear and accepted by the other party, typically through a verbal or written agreement.
   • Both parties must have the capacity to contract and intend to create a legal obligation.

8. Acceptance in unilateral contracts

   • Acceptance occurs when the offeree performs the act specified in the offer.
   • No formal acceptance is required; the act itself constitutes acceptance.
   • The offeror cannot revoke the offer once the offeree has begun performance.

9. Acceptance in bilateral contracts

   • Acceptance occurs when one party agrees to the terms of the offer, typically through a promise.
   • Can be communicated verbally, in writing, or through conduct.
   • Once accepted, both parties are legally bound to fulfill their promises.

10. Revocation of offers in unilateral contracts

    • The offeror can revoke the offer at any time before the offeree begins performance.
    • Once performance has started, the offeror cannot revoke the offer.
    • Revocation must be communicated to the offeree before acceptance occurs.

11. Revocation of offers in bilateral contracts

    • An offer in a bilateral contract cannot be revoked once it has been accepted.
    • Revocation must be communicated before acceptance to be effective.
    • If a party attempts to revoke after acceptance, it may lead to a breach of contract.

12. Performance requirements in unilateral contracts

    • Performance must be completed as specified in the offer to trigger the offeror's obligation.
    • The act must be performed in accordance with the terms of the offer.
    • Partial performance may not be sufficient to enforce the contract.

13. Performance requirements in bilateral contracts

    • Each party must fulfill their respective promises as outlined in the contract.
    • Performance can be executed simultaneously or at different times, depending on the agreement.
    • Failure to perform can result in a breach of contract.

14. Enforceability of unilateral contracts

    • Generally enforceable if the offer is clear, and the offeree performs the act.
    • The offer must be communicated, and the offeree must be aware of it.
    • Courts may enforce the contract if the offeree reasonably relied on the offer.

15. Enforceability of bilateral contracts

    • Enforceable as long as there is mutual consent, consideration, and legal capacity.
    • Both parties must intend to create a binding agreement.
    • Breach of contract can lead to legal remedies, including damages or specific performance.