When it comes to business agreements, there are two types of contracts: bilateral and unilateral. Bilateral contracts involve the exchange of promises between two parties, while unilateral contracts involve only one party making a promise. In this article, we will explore the meaning of unilateral contracts and provide examples to help you gain a better understanding of this type of agreement.
What is a Unilateral Contract?
A unilateral contract is a legal agreement between two parties in which one party promises to do something in exchange for the other party’s performance. Unlike a bilateral contract, which requires promises from both parties, a unilateral contract is binding on the party making the promise. Once that party makes the promise, the other party can accept the offer by performing the requested action.
In a unilateral contract, the party making the promise is known as the offeror, and the party accepting the offer by performing the required action is known as the offeree. The offeror’s promise is known as a “conditional promise” because it is only binding if the offeree performs the requested action.
Examples of Unilateral Contracts
Let`s take a look at a few examples of unilateral contracts:
1. Reward Offer
A reward offer is a common example of a unilateral contract. In this case, the offeror offers a reward for the return of a lost item. The offeror`s promise is conditional on the offeree finding and returning the item. Once the item is found and returned, the offeror is obligated to provide the reward.
For instance, if a company offers a $1,000 reward for the return of a lost laptop, the offeror is making a unilateral contract with the person who finds and returns the laptop. If the laptop is returned, the offeror is obligated to pay the reward.
2. Insurance Policy
An insurance policy is also an example of a unilateral contract. In this case, the insurance company makes a promise to pay a claim in the event of a covered loss. The policyholder is not required to make any promises, but the policy will only be valid if the policyholder pays the premium.
For example, if you purchase an auto insurance policy, the insurance company is making a unilateral contract with you. They promise to pay for damages or injuries caused by a covered accident, but only if you pay the required premium.
3. Bonus Offer
A company might offer a bonus to an employee for reaching a certain sales goal. In this case, the offeror is making a promise to pay the bonus if the employee reaches the goal. The offeree is not required to make any promises but can accept the offer by meeting the sales goal.
For example, a company might offer a salesperson a $5,000 bonus for reaching a specific sales target in a quarter. If the salesperson meets the target, the offeror is obligated to pay the bonus.
In conclusion, a unilateral contract is a legal agreement in which only one party makes a promise, and the other party accepts the offer by performing a requested action. The offeror’s promise is conditional on the offeree performing the action, and once the action is performed, the offeror is obligated to fulfill the promise. Examples of unilateral contracts include reward offers, insurance policies, and bonus offers. Understanding unilateral contracts is essential for anyone entering into legal agreements, as it can help prevent misunderstandings and disputes.