Unilateral Contract Explained

An unilateral business contact does not fulfill the normal understanding of contract. Unilateral business contracts occur frequently however. Unilateral means actions done by one side only.

In an unilateral business contract, only one party has agreed to undertake an action. Unilateral contracts do not require the party offering the contract be informed of any other party's acceptance of the contract. This is one of the major differences between an unilateral business contract and a bilateral business contract.

A unilateral business contract sometimes provides protection to both the party offering the contract and the party accepting the contract. If the terms of the unilateral contract can only be met once, for instance in response to a reward poster posted for the return of a pet, then the party offering the contract has protection from multiple parties attempting to fulfill the contract.

Unilateral business contracts are often offered by way of advertising posters. For instance, Rob may create a poster offering $50 for the return of his lost dog. This constitutes an offer in an unilateral contract. If Dylan finds the dog Rob is looking for, no contract has been created until Dylan brings the dog to Rob and asks for payment. At this time, a contract is in effect because both parties can supply a consideration which would fulfill the terms of the contract. Rob's consideration is the money, and Dylan's consideration is returning the dog.

Another common example of a unilateral contract is an insurance agreement. An insurance agreement is an unilateral contract because there is no future obligation of action placed on the insured. The only obligation is on behalf of the insurance company.

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