Unilateral and Bilateral Contracts are two different types of Executory Contracts wherein the obligation of the contracting parties is yet to be completed. Unilateral Contracts are wherein one of the parties is yet to perform the duty, while Bilateral Contracts are wherein both parties are left to perform their obligations.
Since unilateral contracts are one-sided, one of the parties is known as the offeror and the other offeree. At the same time, a bilateral agreement concerns two parties; hence, both are obligators and obliges.
Key Takeaways
- A unilateral contract is a legal agreement in which one party makes a promise in exchange for a specific act or performance by another party without a reciprocal promise being made; a bilateral contract is an agreement between two parties where each party makes a promise to the other, creating mutual obligations.
- Unilateral contracts involve a promise in exchange for an act or performance, while bilateral contracts involve a mutual exchange of promises between parties.
- Both unilateral and bilateral contracts create legally binding agreements. Still, unilateral contracts rely on a single party’s promise and the other party’s performance, whereas bilateral contracts involve promises and obligations from both parties.
Unilateral vs. Bilateral Contracts
The difference between unilateral and bilateral contracts is that a promise is made in return for action in Unilateral Contracts. In contrast, a deposit is made in a bilateral contract in return for a commitment. Unilateral contracts involve just one party, while bilateral contracts have two.
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Comparison Table
| Parameter of Comparison | Unilateral Contracts | Bilateral Contracts |
|---|---|---|
| Meaning (Definition) | Unilateral contracts are wherein only one party needs to perform an obligatory action as a promise. | Bilateral contracts are wherein both parties need to perform promises made to each other in exchange for a promise itself. |
| Parties involved | Unilateral contracts involve one party or the person who has to fulfill an obligation. | Bilateral contracts involve one or more parties or persons who must fulfill their obligations or promises. |
| Name of the parties | Since unilateral contracts are one-sided, the promise-offering party is known as the offeror, and the other party is known as the offeree. | As bilateral contracts consist of more than one party that has to fulfill promises or obligations to each other, they are known as obligators and obligees. |
| Legal Effect | As only the offerer makes a promise, only that party is legally bound to perform the contract. | As both parties make promises to each other, both are legally bound to perform the contract, and hence the effect is mutual. |
| Time required | As a single party initiates unilateral contracts, there are no strict deadlines. The offeror can extend the period as he is the only one obligated to perform it. | Bilateral contracts have stricter guidelines as both parties agree to a mutual time frame at the beginning of the contract. |
What is Unilateral Contract?
Unilateral contracts are usually one-sided, and the promise of action is carried out by one of the parties to the agreement. The party makes a promise to do something or not to do something in exchange for an action.
Unilateral contracts are part of an executory contract where the parties’ obligations are yet to be completed. The consideration in unilateral documents or contracts is the performance of an action or obligation promised.
In unilateral contracts, though it is one-sided, it is also possible that the promisor has already performed a specific action, and the contract is formed for the other party to fulfill his obligations. The parties in a unilateral contract are known as offerors and offerees.
In unilateral contracts, there is no mutual promise between both parties. Only the party to fulfill the obligation is legally bound to the contract and the repercussions in case of a breach. The offeree is not obliged to perform a specific action as no return promise is made to the offeror.
A daily life example could be that when a person is lost, their family members or relatives usually advertise that the person is lost. Anyone who finds the person or reports the same will be rewarded. In this case, the person advertising has created a unilateral contract.
That person must act by rewarding the person who finds the lost person. When such an advertisement is put out to the public, nobody is obligated to find the lost person but can do so voluntarily. If not done, it would not have any legal repercussions.
Hence, in the legal sense, unilateral contracts are created by a person who acts as a promisor and promises to do a specific action if his conditions are met. The other side of the contract is usually open and includes all those who fulfill the contract’s conditions and are entitled to get the rewards.
What is Bilateral Contract?
Bilateral contracts are usually agreed between two or more parties and can be primarily seen in business and personal contracts. Bilateral contracts are generally legally binding on both parties as mutual agreement lays down the terms.
Bilateral contracts usually exist on a large scale and are in use most of the time. These can be the simple agreements we make while buying a particular thing from a supermarket, where the market agrees to sell us a product, and we arrange to pay for it.
Professional bilateral contracts include those created between employers and employees, sales agreements, leases, mortgages, etc. In bilateral contracts, both parties are to make some promises for the performance of an action in exchange for the security of each other.
Hence, the terms of a bilateral contract are legally binding on both parties, as they have been set up through offers and negotiations by the parties themselves. The breaching party must face the repercussions.
Time is also an essential element of bilateral contracts, as some terms and periods are set mutually before entering the contract. As both parties are to perform a specific action in exchange for each other’s promise, the parties to a bilateral agreement are known as obligators and obligees.
For example, suppose a pizza delivery store promises to deliver pizza within a stipulated time, or else they would offer it for free here. In that case, they create a bilateral contract between the buyer and seller. Hence, if they do not stick to what they promise, they will have to face repercussions.
Main Differences Between Unilateral and Bilateral Contracts
- A single party enters into unilateral Contracts, and the other end remains open to the person who fulfills the conditions. In contrast, Two parties enter into bilateral Contracts on mutually negotiated terms and conditions.
- In a unilateral contract, the consideration is executed, which means the promisor has to perform his promise. In contrast, bilateral contracts have executory considerations as both parties have to perform for each other.
- The main difference between Unilateral and Bilateral contracts is that Unilateral contracts are one-sided, while Bilateral contracts are dual-sided.
- Unilateral contracts have a promise in exchange for the performance of an action. In contrast, Bilateral contracts are reciprocal as both parties have to perform their parts of the action.
- Unilateral contracts only require one party to be legally bound to the contract, while bilateral ones bind both parties legally to the contract.
- https://scholarship.law.bu.edu/cgi/viewcontent.cgi?article=1750&context=faculty_scholarship
- https://iris.unimore.it/bitstream/11380/647091/1/Bilateral%20Contract_JLS2011.pdf
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Emma Smith holds an MA degree in English from Irvine Valley College. She has been a Journalist since 2002, writing articles on the English language, Sports, and Law. Read more about me on her bio page.
