Key Differences between Unilateral and Bilateral Contracts

Last Updated: April 27, 2024

Key Differences between Unilateral and Bilateral Contracts

Contracts, written or spoken, are agreements made between two parties with obligations that are enforceable by law. Through contracts, the relationship between entities is regulated since it contains the rights, duties, and other related terms to which both sides had mutually signed and agreed upon. Once these agreements are breached by either one or both parties, they will be held accountable by the law.

There are two types of contracts, namely: Unilateral contract and Bilateral contract. While the essential difference between the two is in the parties, there are other key factors that differentiate the two.

1. The Involved Parties

Unilateral Contracts

In a unilateral contract, only one party makes the promise. The promise made by one party is made open and available for everyone until someone would take on the action that is a prerequisite to the fulfillment of the promise made by the one who made the promise. The promise will only be fulfilled once someone made an act on it.

For example, a girl had lost her pet cat and her family promised a reward worth $200 if someone can find the cat. If someone finds the cat first, the girl’s family will pay their promised reward. No one is obliged to make a promise that they will find the cat; hence, it’s only the girl’s family who has made the promise, thus there is only one party who makes a promise.

A bilateral contract, by contrast, is what people think of when they hear the word “contract.” There, both parties to the contract make promises to one another. For example, I promise to pay the car wash $15 in exchange for the car wash’s promise to clean my car.

Bilateral Contracts

In a bilateral contract, there are two parties who both agree to do a certain promise. There are still some elements of a unilateral contract that remains, namely: the promisor’s offer, the promisee’s acceptance of the offer, consideration or support for the offer (can be monetary), legal capacities of both parties, and other lawful terms.

For the same example mentioned above, if their neighbor promises to find the girl’s cat in exchange for $200 reward coming from the girl’s family, then there are already two parties both entering into a business agreement.

2. The Offers of Rewards

Unilateral Contracts

Any offers of reward will only come from the promisor in unilateral contracts. It is because unilateral contracts can only be formed by a single party who is legally bound to the promise he made. The promisee, who does the action required by the promisor, only does the acceptance of the reward as long as he has done the action required by the promisor.

For the same example cited above, the family is the one who is only required and obliged to give the $200 reward to whoever finds their girl’s cat. The one who finds the cat is not responsible to give or do anything besides that the action required by the family, the promisor, which is to find and give them the girl’s lost cat

Bilateral Contracts

In a bilateral contract, it is not applicable to have offers of rewards since both parties are required to make promises in which they both agreed on at the same time.because it requires both parties to make promises at the time the contract is being formed.

3. The Element of Time

Unilateral Contracts

In a unilateral contract or offer, the promisor or the party making the offer have to specify the duration of the offer is good for.

For example, if the promisor had lost his dog and offers up a $100 reward for the first week his dog went missing, he can increase the reward up to $150 on the second week after his dog went missing.

Bilateral Contracts

In a bilateral contract or offer, both parties agree on a time frame in which a product or service shall be delivered or done and if either one or both of the parties fail, it is already deemed as a breach of contract.

For example, a family finds a carpenter who can fix their broken ceilings and windows of their house. The family agrees on the carpenter’s $75 dollar rate per hour and the carpenter agrees to the family’s limit of fixing their ceilings and windows in just three days. Both parties enter into an agreement. If ever the carpenter would get past four days and the house is not yet fixed, he breaches the agreement and it might cause the decrease of his pay. Likewise, if the family pays him less than the carpenter’s rate, they also breach the contract and the carpenter may not continue his job.

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