What Is the Difference between Bilateral & Unilateral Contracts?

Written by maggie lourdes
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  • Introduction

    What Is the Difference between Bilateral & Unilateral Contracts?

    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.

    Bilateral contracts are the most common types of contracts used. (Stockbyte/Stockbyte/Getty Images)

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    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.

    Bilateral contracts are based on exchanges of promises. (Thinkstock Images/Comstock/Getty Images)

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    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.

    Rewards for lost pets are examples of unilateral contracts. (Jupiterimages/liquidlibrary/Getty Images)

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    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.

    An offeror may change his mind and revoke an offer before it is accepted. (BananaStock/BananaStock/Getty Images)

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    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.

    Contract terms may not violate the law. (Ablestock.com/AbleStock.com/Getty Images)

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