What is a One-Way Contract?
A unilateral contract can be defined as a contract in which one party makes a promise or undertakes a performance without there being a reciprocal (two-sided) agreement. That is to say, one party offers to do something in exchange for something from the other, but the other party does not need to perform anything until the first moves forward with his or her promise. In other words, the performance of the offeror—that is, the promise made by the party making the offer—is made in "exchange" for nothing from the offeree…the person to whom the offer is made.
Unilateral contracts are different from, and contrast sharply with bilateral contracts. A bilateral contract is one in which a promise is given in exchange for a return promise. When one party makes a promise, the other other must make a "counter" promise, in order for the deal to be complete. So, at least in theory, the promise of Party A would be meaningless unless it meant something in the context of the contract with Party B. In this way, the intention between both parties is clear , because the promise made by two parties is enough to establish the agreement. Both parties add value to the deal; the deal is provided for and existence through the words and promises of two parties.
A promise made by one party, and unpaid for by the other, however, can be enough to create an agreement between two parties. Imagine, for example, that you held a mugger at gunpoint, and told him, "if you tell me where the nearest police station is, I will not shoot you." Hearing such a promise from you, the mugger would reveal his location and get away without any bullets lodged in his backside. Here, the promise to save the mugger was enough to receive his promise of information about the police station. After he delivered, however, the mugger could leave immediately, because he had no further obligations. Unlike a bilateral contract, nothing remains of the agreement between you and the mugger. Once you receive the information and the mugger walks away, your promise to not shoot has ceased to be. In the unilateral contract, it is the initial performance of one party to the contract that makes the deal real.
Examples of a One-Way Contract
A common example of a unilateral contract is that of a reward offer, such as for finding a lost dog, stolen item, or missing person. For instance, consider the scenario where a dog owner posts up signs for a lost dog, offering a $1,000 reward for its safe return. When an individual finds the dog and returns it promptly to the owner, the owner is then legally bound to pay the $1,000 reward as advertised. The dog owner’s first step is to make an offer to the public that carries a promise to pay if the return condition is satisfied.
If the lost dog scenario were transmuted into a contract for the sale of goods, the unilateral aspect would remain, but would be implicit. In these transactions, the seller is not obligated to sell unless a buyer offers money for the product. However, without a specific offer of purchase, the seller is not bound to sell the product under a unilateral promise to do so for anyone who asks. (A bilateral contract, in contrast, is one in which a promise is made in exchange for a promise, such as when employer promises to pay employee to do X job and employee promises to work.)
In the realm of contracts for the sale of goods, the unilateral promise or offer is that the seller will sell the good for a certain price when approached but that no obligations are undertaken prior to that point.
Important Elements of a One-Way Contract
A unilateral contract has three key elements: an offer to enter into a contract, acceptance by the other party, and consideration.
The offer is a statement that includes the terms of the agreement. When a unilateral contract is entered into, one party extends an offer and the other party has to accept it. The offer must be clear, definite, and communicated to the other party.
Acceptance is how one party agrees to the terms of the offer. In the case of a unilateral contract, acceptance is given in the form of performance of the requested act. The performance of some act or work is what completes the offer for the party who requested it.
The final element of a unilateral contract is consideration. It is the primary element to any contract and without consideration, the contract is not enforceable. Consideration is defined as something of value that is given in exchange for something else of value. Consideration can be money, an object, or a promise to do something. Consideration is central to a unilateral contract because the party who requested performance is offering consideration for the completed act or work.
Legal Effects of a One-Way Contract
The law generally requires that a contract consists of an offer or a promise by one party, acceptance by the second party, and consideration, which is something of value, exchanged by both parties. However, unilateral contracts are an exception to this rule. The general contract formation rules discussed in the first section do not apply to unilateral contracts.
A unilateral contract is a unique kind of contract in that one party offers consideration, but does not require the other party to do anything in exchange, which prevents the second party from making an offer and the first party from accepting the offer. The second party, instead, must complete whatever task or action the first party has required, so long as it does not involve any preexisting duty, so that the unilateral contract may be completed .
Because only one party to the contract is required to do anything in order for the contract to be completed, unilateral contracts can be difficult to enforce. If one party does not fulfill any requirements of the contract, the other party may not have the ability to do anything in response.
Fortunately, the law does not give unilateral contracts any less protection than other kinds of contracts. A court may not be able to order the breaching party to fulfill their end of the deal, as it may have with a bilateral contract, but the non-breaching party can still receive compensation even if the prior contract was never formally completed. There are multiple avenues through which the non-breaching party can collect this payment. They can ask the court to compensate them for their losses, pay restitution, or provide fair value.
Advantages & Disadvantages of a One-Way Contract
From the offeror’s perspective, there are several advantages to entering into a unilateral contract. For one, the offeror has the opportunity to dictate how the contract would be formed, including the terms and conditions that must be met by the other party before the contract is fully formed and will be enforced under the law. A unilateral contract can serve as a means of incentivizing action from someone who would not otherwise enter into a contract. By offering a reward or payment upon the completion of a task rather than the promise of payment in the event such a task is completed, the offeror may entice an offeree to engage in the desired behavior. It is also advantageous to an offeror to enter into a unilateral contract because doing so allows the offeror to avoid the potential issue of a fraudulent contract with mutual agreement, in which the terms are ideal for one party but entirely unreasonable for the other. In this situation, the other party might be compelled to comply with the contract upon threat of legal recourse or due to coercion. A unilateral contract is typically much easier to enforce in the event of a dispute, as the offeror can simply provide evidence that the terms were not met, and therefore no contract was formed. Despite the many benefits of a unilateral contract, there are several downsides for parties who choose to enter into this type of contract. The greatest disadvantage to an offeror is the risk that he/she may never receive the desired result, whether it is the requested action or the promised payment. While an offeror may be able to cut ties and move on, the situation is usually much more complicated for an offeree. If the offeree believes that he/ she has fully complied with the terms of the contract, but the offeror refuses to compensate him/her, the offeree must then attempt to prove that the action was performed in accordance with the terms of the contract. Even when both parties have good faith that the terms of the contract were fulfilled, it is not uncommon for the courts to become involved to determine the outcome. In addition to the fact that the dispute could become very costly and require considerable time and effort to resolve in court, it can also be a frustrating experience if the court does not side with you. A further drawback for an offeree is the potential for ambiguous offers. The duty of performance owed by the offeree must be clearly defined by the offeror. If the offeror offers vague or unclear terms, such as "at a later date," the offeror may be able to claim that the necessary work was never performed. This could cause issues for the offeree, for example, if the offeree has purchased materials or performed work on the expectation that the contract will be formed.
Common Questions Asked About a One-Way Contract
While it only requires one party making an offer and one party accepting it (however informally), a unilateral contract is one of the more nuanced types of contract that you may encounter in the future. We wanted to help ensure that you understand this type of contract so that you can begin to use it in appropriate scenarios, and have therefore put together answers to some of the most frequently asked questions about unilateral contracts on your behalf.
What Are Some Examples of Unilateral Contracts?
Unilateral contracts are frequently used in great public promotions, which typically feature awards or prizes for the accomplishment of a specific task. Indeed, the most well-known example of a unilateral contract is that in which the offeror promises to pay a sum of money to anyone who successfully performs the required task, such as finding a dog in the case of the aforementioned award. This obviously isn’t the case with most unilateral contracts, but it gives at least a general idea of what a unilateral contract will look like .
What Are the Requirements of a Unilateral Contract?
Like any kind of enforceable contract, a unilateral contract needs to include a few essential elements: In addition to these elements, it’s important that all terms and conditions of a unilateral contract be clearly defined so there is no confusion or ambiguity about what the terms or conditions are.
Are Unilateral Contracts Enforceable?
Yes, they are. Once a unilateral contract has been offered and you’ve fully performed all of the conditions and terms, that contract is legally binding.
What Are Some Examples of Unilateral Contracts You Should Follow Through On?
Some examples of situations in which you should follow through on a unilateral contract could include: These are just a few of the examples of some of the most common forms of unilateral contracts you might encounter. The important thing is to understand the specific terms of the situation to determine how best to proceed.