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Unilateral Contract vs. Bilateral Contract: What's the Difference?

Edited by Sumera Saeed || By Sawaira Riaz || Published on November 23, 2023
A Unilateral Contract involves a promise in exchange for an action, while a Bilateral Contract involves mutual promises between two parties.

Key Differences

In a Unilateral Contract, one party makes a promise contingent upon the other party performing a certain action. On the other hand, a Bilateral Contract involves both parties exchanging promises, and each becomes obligated to fulfill their respective promises.
Sawaira Riaz
Nov 23, 2023
A characteristic feature of a Unilateral Contract is that it becomes binding only when the party performs the specified action. In contrast, a Bililateral Contract becomes binding once both parties agree, irrespective of any subsequent performance.
Sawaira Riaz
Nov 23, 2023
Both Unilateral Contracts and Bilateral Contracts have their place in legal and business dealings. For instance, reward offers are typically Unilateral Contracts; if someone meets the condition (e.g., finding a lost pet), they can claim the reward. On the flip side, most everyday contracts, like buying a car or hiring an employee, are Bilateral Contracts where both parties have clear obligations.
Sawaira Riaz
Nov 23, 2023
With Unilateral Contracts, the party making the promise has no right to demand performance since the second party hasn't made any promise. Whereas in Bilateral Contracts, both parties can expect and demand the performance because of the mutual promises made.
Sawaira Riaz
Nov 23, 2023
It's essential to identify whether a contract is Unilateral or Bililateral because the rights, obligations, and potential legal remedies can differ. While a Bilateral Contract typically obligates both parties from the outset, a Unilateral Contract does so only upon the completion of the specified action.
Aimie Carlson
Nov 23, 2023
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Comparison Chart

Promise Structure

One party promises in exchange for an action.
Both parties exchange promises.
Sawaira Riaz
Nov 23, 2023

Binding Nature

Becomes binding upon action performance.
Binding once agreed, regardless of performance.
Sawaira Riaz
Nov 23, 2023

Demand of Performance

No right to demand action since only one promise exists.
Both parties can demand performance due to mutual promises.
Sawaira Riaz
Nov 23, 2023

Typical Examples

Rewards, contests, etc.
Sale contracts, employment agreements, etc.
Sara Rehman
Nov 23, 2023

Obligation Start Point

Obligation arises only when the specified action is performed.
Obligations start as soon as both parties agree, even before any actual performance occurs.
Aimie Carlson
Nov 23, 2023
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Unilateral Contract and Bilateral Contract Definitions

Unilateral Contract

The party making the promise cannot demand the action.
A Unilateral Contract to pay for a delivered newspaper doesn't oblige anyone to deliver it.
Harlon Moss
Oct 21, 2023

Bilateral Contract

The contract becomes binding upon agreement, not action.
Once both parties agree in a Bilateral Contract to trade a car for a sum of money, they are both bound.
Sawaira Riaz
Oct 21, 2023

Unilateral Contract

Such contracts are often used when the promisor is unsure if anyone will fulfill the action.
A Unilateral Contract in a treasure hunt only binds the organizer if someone finds the treasure.
Sara Rehman
Oct 21, 2023

Bilateral Contract

It's the most common type of contract in daily transactions.
A lease agreement, where one party promises a space and the other rent, is a typical Bilateral Contract.
Sawaira Riaz
Oct 21, 2023

Unilateral Contract

A Unilateral Contract is based on one party's promise in return for another's action.
If you find my lost dog, I'll pay you $500 is a Unilateral Contract.
Sawaira Riaz
Oct 21, 2023

Bilateral Contract

Both parties can demand performance based on the promises.
In a Bilateral Contract for a service, both the payment and service provision can be demanded.
Janet White
Oct 21, 2023

Unilateral Contract

It doesn't require mutual promises from involved parties.
The announcement Reward for a lost watch creates a Unilateral Contract.
Sawaira Riaz
Oct 21, 2023

Bilateral Contract

Both parties have respective obligations and expectations.
An employment agreement, where an employer promises to pay salary and an employee to work, is a Bilateral Contract.
Sawaira Riaz
Oct 21, 2023

Unilateral Contract

One party is legally bound only when the other completes a specific task.
In a Unilateral Contract, offering a prize for winning a race binds the offeror only if someone wins.
Sawaira Riaz
Oct 21, 2023

Bilateral Contract

A Bilateral Contract involves mutual promises between two entities.
A sale agreement where one promises to sell and the other to buy is a Bilateral Contract.
Sawaira Riaz
Oct 21, 2023

FAQs

Can both parties demand performance in a Bilateral Contract?

Yes, both parties can demand performance due to mutual promises.
Sawaira Riaz
Nov 23, 2023

Are reward offers Unilateral Contracts?

Yes, reward offers are typically Unilateral Contracts.
Sawaira Riaz
Nov 23, 2023

Can one party demand action in a Unilateral Contract?

No, since only one promise exists, there's no right to demand action.
Sawaira Riaz
Nov 23, 2023

Can a Unilateral Contract turn into a Bilateral Contract?

No, the nature of the contract is determined by the original promises and terms.
Sawaira Riaz
Nov 23, 2023

Are sales agreements Bilateral Contracts?

Yes, sales agreements where both parties have obligations are Bilateral Contracts.
Sawaira Riaz
Nov 23, 2023

What is a Unilateral Contract?

A Unilateral Contract involves one party's promise in exchange for another's action.
Sawaira Riaz
Nov 23, 2023

When does a Unilateral Contract become binding?

It becomes binding when the specified action is performed by one party.
Sawaira Riaz
Nov 23, 2023

Is an employment agreement a Bilateral Contract?

Yes, as both the employer and employee have promises to fulfill.
Aimie Carlson
Nov 23, 2023

Why are Bilateral Contracts often written?

To clearly outline the mutual obligations and terms agreed upon.
Janet White
Nov 23, 2023

How does a Bilateral Contract work?

In a Bilateral Contract, both parties exchange promises and have mutual obligations.
Sawaira Riaz
Nov 23, 2023

Can one revoke the offer in a Unilateral Contract?

Generally, offers in Unilateral Contracts can't be revoked once the other party starts performance.
Janet White
Nov 23, 2023

Is a handshake deal a Bilateral Contract?

Yes, if both parties exchange promises, even orally, it's a Bilateral Contract.
Aimie Carlson
Nov 23, 2023

What happens if one party doesn't fulfill their promise in a Bilateral Contract?

The other party may seek legal remedies due to breach of contract.
Sawaira Riaz
Nov 23, 2023

Which is more common: Unilateral or Bilateral Contracts?

Bilateral Contracts are more common in daily transactions.
Janet White
Nov 23, 2023

Do Unilateral Contracts favor one party?

They can, especially if the action required is challenging with a disproportionate reward.
Janet White
Nov 23, 2023

Can a Bilateral Contract have more than two parties?

Yes, as long as there are mutual promises among all parties, it remains bilateral in nature.
Aimie Carlson
Nov 23, 2023

What's the main benefit of a Bilateral Contract?

Both parties have clear expectations and legal protections due to mutual promises.
Sawaira Riaz
Nov 23, 2023

What's an example of a Bilateral Contract?

A rental agreement where both the landlord and tenant have obligations is an example.
Janet White
Nov 23, 2023

How can one exit a Bilateral Contract?

Either through mutual agreement, performance, breach, or other contract stipulations.
Sawaira Riaz
Nov 23, 2023

Do all Bilateral Contracts need to be in writing?

No, but written contracts provide clearer evidence and protection.
Sara Rehman
Nov 23, 2023
About Author
Written by
Sawaira Riaz
Sawaira is a dedicated content editor at difference.wiki, where she meticulously refines articles to ensure clarity and accuracy. With a keen eye for detail, she upholds the site's commitment to delivering insightful and precise content.
Edited by
Sumera Saeed
Sumera is an experienced content writer and editor with a niche in comparative analysis. At Diffeence Wiki, she crafts clear and unbiased comparisons to guide readers in making informed decisions. With a dedication to thorough research and quality, Sumera's work stands out in the digital realm. Off the clock, she enjoys reading and exploring diverse cultures.

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