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What Is the Difference between Bilateral & Unilateral Contracts?

Updated March 28, 2017

A contract is a legally binding agreement between two or more competent parties. Every contract requires an offeror and an offeree; an offeror is the party who makes an offer to contract, and an offeree is the party who accepts the offer made. Bilateral and unilateral contracts differ in the manner in which they are accepted; bilateral contracts are more common than unilateral contracts. Both, however, are equally enforceable in court. Deciding whether to use a bilateral or unilateral contract depends on the circumstances and goals of the parties involved.

Forming a Bilateral Contract

Bilateral contracts are formed when parties exchange a set promises. For example, a contract to buy real estate involves a promise to pay an agreed price in exchange for a promise to convey title to the property. Making the promises is what creates a bilateral contract; the actual performance of paying the money and transferring title consummates the agreement. A party who breaks his promise to perform may be sued for breach of contract.

Creating a Unilateral Contract

A unilateral contract is based on a promise in exchange for a specific act. For example, a person's pet dog, Spike, is missing, and the dog owner posts a sign at a local store with contact details and a photo of Spike. The sign reads "$100 Reward for the Return of Spike." A unilateral contract will be formed if someone returns the dog. The offeror is asking for acceptance by performance, not by promise. If the dog is returned and the reward is not paid, the offeror may be sued for breach of contract.

Contract Revocation

A bilateral or unilateral contract may be revoked before an offeree accepts. For example, Bob offers to sells his car to Pat for £325; Bob may revoke the offer before Pat promises to pay the £325. Likewise, Tom states he will pay anyone who swims the Detroit River £650; he may revoke the offer before someone completes the swim. Also, if someone is in the process of swimming, he must allow her the chance to complete the task before he can revoke.

Legality of Contracts

Contracts, whether bilateral or unilateral, may not encompass illegal promises or acts. A bilateral contract to sell stolen goods, for example, cannot be enforced in court. A judge also would not honour a unilateral contract calling for an illegal act, such as injuring a person or damaging property. A party with questions about the enforceability of a specific contract should seek the advice of an attorney.

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About the Author

Maggie Lourdes is a full-time attorney in southeast Michigan. She teaches law at Cleary University in Ann Arbor and online for National University in San Diego. Her writing has been featured in "Realtor Magazine," the N.Y. State Bar's "Health Law Journal," "Oakland County Legal News," "Michigan Probate & Estate Planning Journal," "Eye Spy Magazine" and "Surplus Today" magazine.