What is a bilateral contract?
When most people think of contracts, bilateral agreements come to mind. In its most basic form, a bilateral contract is an agreement between at least two people or groups. Most business and personal contracts fall into this category.
Examples of bilateral contracts are present in everyday life. You're entering this type of agreement every time you make a purchase at your favorite store, order a meal at a restaurant, receive treatment from your doctor or even checkout a book at your library. In each circumstance, you've promised a certain action to another person or party in response to that person or party's action.
What is a unilateral contract?
The easiest way to understand unilateral business contract is by analyzing the word 'unilateral.' In its simplest terms, unilateral contracts involve an action undertaken by one person or group alone. In contract law, unilateral contracts allow only one person to make a promise or agreement.
You might see examples of unilateral contracts every day, too; one of the most common instances is a reward contract. Pretend you've lost your dog. You place an advertisement in the newspaper or online offering a $100 reward to the person who returns your missing pooch. By offering the reward, you're offering a unilateral contract. You promise to pay should anyone fulfill the obligation of returning your dog. You're the only person who has taken any action in this contract, as no one is specifically responsible or obligated to finding your dog passed on this interaction.
Another common example of a unilateral contract is with insurance contracts. The insurance company promises it will pay the insured person a specific amount of money in case a certain event happens. If the event doesn't happen, the company won't have to pay.
How are bilateral and unilateral contracts alike?
Both unilateral and bilateral contracts can be breached. Consider the term 'breach' synonymous with 'break.' This means breach of contract can be defined as a broken contract, stemming from failure to fulfill any term of a contract without a justifiable, lawful excuse.
Common examples of broken unilateral contracts might include any situation in which the person promising the pay in exchange for a completed act refuses. For example, if you offer $100 for the return of your dog, but then refuse to pay because you think the person who brought the dog back stole him, you'd likely be in breach of contract because you broke your word about the payment. Bilateral contracts can also be breached. A bilateral contract might be broken if a coworker refuses to complete his or her portion of a job; when an employee does something prohibited by his or her job contract; or even when a customer prevents the contractor from satisfying the obligation or finishing the project at hand.
You also need to prove the same criteria should you decide to enforce a bilateral or unilateral contract in court. In each situation, you need to establish:
- The contract existed.
- The contract was broken.
- You suffered a loss.
- The person you're challenging was responsible.
What's the difference between bilateral and unilateral contracts?
At first glance, the most obvious difference between bilateral and unilateral contracts is the number of people or parties promising an action. Bilateral contracts need at least two, while unilateral contracts only obligate action on one part.
The other differences might be a bit more subtle. Look at what's being offered. In unilateral contracts, one offering the deal promises to pay when a certain act or task is complete, but bilateral contracts allow for an upfront exchange.
What works best?
Both unilateral and bilateral contracts are enforceable in court. For example, a unilateral contract is enforceable when someone chooses to begin fulfilling the act demanded by the promisor. A bilateral contract is enforceable from the get-go; both parties are bound the promise.
To get started with your own business contract, just follow our step-by-step instructions and you'll be on your way.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.