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
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