Listen audio version
Unilateral and Bilateral Contracts are both 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 obligation while Bilateral Contracts are wherein both the parties are left to perform their obligations.
Since unilateral contracts are one-sided contracts, one of the parties is known as the offeror and the other offeree. While a bilateral contract concerns two parties and hence both of them are known as an obligator and an obligee.
Unilateral vs Bilateral Contracts
The difference between unilateral and bilateral contracts is that in Unilateral Contracts a promise is done in return of action, while in a bilateral contract a promise is done in return of a promise. Unilateral contracts have the involvement of just one party, while bilateral contracts have two.
Comparison Table Between Unilateral and Bilateral Contracts (in Tabular Form)
|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 the parties to the contract 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, both of whom have to 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, both of them are known as obligators and obligee.|
|Legal Effect||As only the offerer makes a promise, only that party is legally bound to perform the contract.||As both the parties make promises to each other, both are legally bound to perform the contract, and hence the effect is mutual.|
|Time required||As unilateral contracts are initiated by a single party, 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 the 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 contract. The party makes a promise to do something or not to do something in exchange for an action.
Unilateral contracts are a part of an executory contract where the obligations of the parties are yet to be completed. The consideration in unilateral documents or contracts is the performance of an action or obligation that has been promised.
In unilateral contracts, though it is a one-sided contract, it is also possible that the promisor has already performed a certain 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 offeree.
In unilateral contracts, there is no mutual promise between both parties and 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 certain action as there is no return promise made to the offeror.
A daily life example could be that when a person is lost, his or her family members or relatives usually put out an advertisement announcing that the person is lost and anyone who finds the person or reports of the same will be rewarded. In this case, the person advertising has created a unilateral contract.
That person is obligated to act by rewarding the person who finds the lost person. When such an advertisement is put out, as public, nobody is obligated to find the lost person but can do so voluntarily and if not done, 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 certain action, if his conditions are met, and the other side of the contract is usually open and includes all those who fulfill the conditions of the contract and be entitled to get the rewards.
What is Bilateral Contract?
Bilateral contracts are usually agreed between two or more parties and can be mostly seen in business and personal contracts. Bilateral contracts are usually legally binding on both the parties as the terms are laid down by both of them by mutual agreement.
Bilateral contracts are usually the ones that exist on a large scale and are in use most of the time. These can be the simple agreements that we make while buying a particular thing from a supermarket, where the market agrees to sell us a product and we agree to pay for it.
Professional bilateral contracts include the ones that are 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 promise of each other.
Hence, the terms of a bilateral contract are legally binding on both the parties, as they have been set up through offers and negotiations by the parties themselves, and the repercussions need to be faced by the breaching party.
Time is also an essential element of bilateral contracts, as some specific terms and periods are set mutually before entering into the contract. As both the parties are to perform a certain action in exchange for each other’s promise, the parties to a bilateral contract are known as obligators and obligee.
For example, if a pizza delivery store promises to deliver pizza within a stipulated time, or else they would offer it for free, here, they are creating 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
- Unilateral Contracts are entered into by a single party and the other end remains open to the person who fulfills the conditions, while Bilateral Contracts are entered into by two parties on mutually negotiated terms and conditions.
- In a unilateral contract, the consideration is executed, which means the promisor has to perform his promise, while bilateral contracts are with executory considerations as both the 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, while Bilateral contracts are reciprocal in nature as both the 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.
Both unilateral, as well as Bilateral contracts, are an essential part of our day-to-day life. We knowingly or unknowingly enter into both of these, daily in our lives. Unilateral contracts are always one-sided and promise some reward in exchange for a said consideration or action, while Bilateral contracts are dual-sided in nature and promise performance in exchange for a performance.
Both unilateral as well as bilateral contracts can be oral as well as written and both are legally enforceable under the law. Both contracts require their terms to be legal as well as mutually negotiated and agreed upon between the parties.
Table of Contents