Contract - Bilateral and Unilateral Contracts

Bilateral and Unilateral Contracts

Contracts may be bilateral or unilateral. A bilateral contract is an agreement in which each of the parties to the contract makes a promise or set of promises to the other party or parties. For example, in a contract for the sale of a home, the buyer promises to pay the seller $200,000 in exchange for the seller's promise to deliver title to the property.

In a unilateral contract, only one party to the contract makes a promise. A typical example is the reward contract: A promises to pay a reward to B if B finds A's dog. B is not under an obligation to find A's dog, but A is under an obligation to pay the reward to B if B does find the dog. The consideration for the contract here is B's reliance on A's promise or B giving up his legal right to do whatever he wanted at the time he was engaged in the finding of the dog.

In this example, the finding of the dog is a condition precedent to A's obligation to pay, although it is not a legal condition precedent, because technically no contract here has arisen until the dog is found (because B has not accepted A's offer until he finds the dog, and a contract requires offer, acceptance, and consideration), and the term "condition precedent" is used in contract law to designate a condition of a promise in a contract. For example, if B promised to find A's dog, and A promised to pay B when the dog was found, A's promise would have a condition attached to it, and offer and acceptance would already have occurred. This is a situation in which a condition precedent is attached to a bilateral contract.

Conditions precedent can also be attached to unilateral contracts, however. This would require A to require a further condition to be met before he pays B for finding his dog. So, for example, A could say "If anyone finds my dog, and the dog is alive, I will give that person $100." In this situation, even if the dog is found by B, he would not be entitled to the $100 unless the dog is alive. Therefore the dog being alive is a condition precedent to A's duty being actualized, even though they are already in a contract, since A has made an offer and B has accepted.

An offer of a unilateral contract may often be made to many people (or 'to the world') by means of an advertisement. (The general rule is that advertisements are not offers.) In the situation where the unilateral offer is made to many people, acceptance will only occur on complete performance of the condition (in other words, by completing the performance that the offeror seeks, which is what the advertisement requests from the offerees - to actually find the dog). If the condition is something that only one party can perform, both the offeror and offeree are protected – the offeror is protected because he will only ever be contractually obliged to one of the many offerees, and the offeree is protected because if she does perform the condition, the offeror will be contractually obligated to pay her.

In unilateral contracts, the requirement that acceptance be communicated to the offeror is waived unless otherwise stated in the offer. The offeree accepts by performing the condition, and the offeree's performance is also treated as the price, or consideration, for the offeror's promise. The offeror is master of the offer; it is he who decides whether the contract will be unilateral or bilateral. In unilateral contracts, the offer is made to the public at large.

A bilateral contract is one in which there are duties on both sides, rights on both sides, and consideration on both sides. If an offeror makes an offer such as "If you promise to paint my house, I will give you $100," this is a bilateral contract once the offeree accepts. Each side has promised to do something, and each side will get something in return for what they have done.