What is a unilateral contract?

/ 4 min read

Unilateral contracts are simple yet prevalent in our lives, functioning as one-sided promises where fulfillment comes from performing an action rather than a mutual exchange of promises. They are legally binding when the performer starts the action. Common in scenarios like rewards, insurance policies, and promotions, these contracts are performance-based, don’t require acceptance notification, and become irrevocable once performance starts. Writing them requires clear, public communication and legal compliance. Papersign, as an eSignature solution, offers a streamlined way to formalize these agreements, ensuring clarity and legal enforceability.

Unilateral contracts might sound complex, but you encounter them a lot more often than you think. They're the simple "if-then" promises that power everything from reward offers to contests.

Unilateral contract definition

At its core, a unilateral contract is a one-sided promise. Unlike a bilateral contract, where both parties exchange mutual promises, a unilateral contract is fulfilled through performance, rather than a promise in return, and is legally binding only upon the party that commits to an action.

It's the legal equivalent of saying, "I promise to do X if you do Y," where "Y" is an action rather than a promise. This type of contract becomes binding when the other party begins performing the task or fulfills the condition, making it an integral part of everyday life, as well as the legal landscape.

Key elements of unilateral contracts

Unilateral contracts come with their own unique playbook. Here's the rundown on what makes these one-sided promises tick:

  • Performance-based: The contract is typically fulfilled by performing a specific act or duty, not by making a return promise.
  • No obligation for acceptance: The offeree is not required to notify the offeror of their intent to fulfill the condition; they can simply act.
  • Irrevocability once the performance starts: Once the offeree starts performing the requested action, the offeror cannot revoke the offer.
  • Clear terms: The terms must be clear and unequivocal so the offeree knows what performance is necessary to fulfill the contract.’

These features set unilateral contracts apart, providing a straightforward framework for one-party promises that invite an action rather than a bilateral agreement.

Common uses of unilateral contracts

Unilateral contracts are the Swiss Army knives of the legal world—versatile and practical for various scenarios. Here are some common uses where they shine:

Rewards and contests

These are the quintessential examples of unilateral contracts. Whether it’s a lost pet poster or a cash prize for winning a marathon, the promise is made to the world at large, and anyone who accomplishes the task can claim the reward.

Insurance policies

Many insurance agreements are fundamentally unilateral. The insurer promises to pay under certain conditions, like a house fire or car accident, and the insured performs by paying premiums.

Promotions and offers

When a company offers a free product to the first 100 customers or a bonus to employees who meet specific targets, they’re creating unilateral contracts.

‘Pay upon completion’ jobs

Sometimes, work arrangements are set up so that payment is made upon the completion of a job, like roofing or landscaping. These can be seen as unilateral contracts if there’s no obligation for the worker to complete the job.

Understanding the common uses of unilateral contracts helps identify them in everyday life and appreciate their role in facilitating one-sided promises that motivate action.

Tips for writing a unilateral contract

Executing a unilateral contract might seem like a walk in the park, but getting the details right is crucial to ensure that it's legally binding. Here's how to seal the deal:

  1. Clearly define the promise: The offer must be clear-cut. For example, "I will pay $500 to the person who finds and returns my lost dog" leaves no room for ambiguity.
  2. Make it known: A unilateral contract is no good if it's a secret. It needs to be communicated effectively, often publicly, so potential fulfillers know the offer exists.
  3. Understand acceptance through performance: Acceptance of a unilateral contract isn't verbal or written—it's through action. Completing the task is what seals the deal.
  4. Ensure legal capacity: Both parties should have the legal ability to enter into the contract, meaning they are of sound mind and not minors.
  5. Check for legality: The action required to fulfill the contract must be legal. No legally binding contract can be formed based on illegal activities.

By adhering to these steps, you ensure that the unilateral contract is executed correctly, providing a clear and enforceable agreement between the offering and the performing parties.

Simplify contracts with Papersign

If you're ready to draft your own or want to ensure your existing ones are up to snuff, consider using an eSignature solution like Papersign to formalize your agreements.

Papersign streamlines the process, ensuring your contracts are clear, traceable, and legally binding. Secure your promises and turn your unilateral contracts into binding agreements with confidence.

Sign up for a free Papersign account.

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