What is a Unilateral Contract?

A unilateral contract is a type of contract in which one party promises payment to another in exchange for a specific act.

Unilateral contracts differ from bilateral contracts in that they’re made for just one party. This makes securing express agreement from a second party unnecessary. Unilateral contracts, therefore, are not actually reciprocal and can be contested only under specific circumstances. They can be put to use in a variety of ways across many industries and scenarios.

Parts of a unilateral contract

All unilateral contracts must contain a few key parts. These include:

  • An Offeror — This is the party that makes the initial offer.
  • An Offer — This is the benefit or reward promised by the Offeror in exchange for the performed act.
  • An Offeree — This is the party that may benefit from the Offeror's offer if they perform the previously specified act.

Unilateral contracts are used for open offers

Unilateral contracts require commitment only from the party that intends to offer payment for a given act. Therefore, these contracts are uniquely well suited to serving as legal records of open offers.

An open offer is any offer extended to the public by an offeror with no specific or previously known offeree. Open offers range in form and function from priced product advertisements to rewards programs and competitions. Even law enforcement make use of unilateral contracts by offering reward money for information that helps to solve a crime.

In some cases, insurance companies use unilateral contracts in a more complex fashion. These kinds of unilateral contracts typically specify the circumstances under which the insurer can be expected to pay the insured or cover their expenses. However, other parts of an insurance agreement are strictly bilateral as they require express agreement from the insured to be valid.

Unilateral contracts are offers from a single party that don’t require the agreement of a second party. It’s a contractual agreement typically offering payment following the completion of a specified act.