Unilateral Contracts in Business

Definition

A unilateral contract is a type of contract where one party (the promisor) makes a promise in exchange for the performance of an act by the other party (the promisee).

Key Characteristics

• Only one party makes a promise (the promisor)
• The promisee does not make a promise in return
• The promisee's performance is the consideration for the promisor's promise
• The contract is formed when the promisee performs the requested act

Example

• A lost dog owner offers a reward to anyone who returns their dog. The owner is the promisor, and the person who returns the dog is the promisee. The promisee's performance (returning the dog) is the consideration for the promisor's promise (paying the reward).

Distinguishing from Bilateral Contracts

• In a bilateral contract, both parties make promises to each other
• In a unilateral contract, only one party makes a promise, and the other party's performance is the consideration

Legal Enforceability

• Unilateral contracts are legally enforceable, just like bilateral contracts
• The promisor is bound to their promise once the promisee has performed the requested act

Importance in Business

• Unilateral contracts are often used in business to incentivize people to take action (e.g., offering a reward for a specific task)
• They can be an effective way to motivate people to perform a specific act without requiring a formal agreement or negotiation.

Learn about unilateral contracts, where one party makes a promise in exchange for an act. Understand the key characteristics, examples, and importance of unilateral contracts in business. Test your knowledge on this type of contract.