Unilateral Contract

A one-sided, legally binding agreement where one party agrees to pay for a specified act

What is a Unilateral Contract?

A unilateral contract is primarily a one-sided, legally binding agreement where one party agrees to pay for a specified act. Given that unilateral agreements are one-sided, they only require a pre-arranged commitment from the offeror, unlike a bilateral agreement where a commitment is required from two or more parties.


Unilateral Contract


A bilateral contract is legally binding between two or more parties, where the offer by the promisor is accepted by the promisee. Another difference between the two types of contracts is that the unilateral contract is enforceable when someone chooses to begin fulfilling the act demanded by the offeror, while a bilateral contract is enforceable from the time when the contract is signed.


Unilateral Contract Examples

We observe many unilateral contracts take place in our everyday lives. One of the most common examples is a reward contract. For instance, when someone posts a reward for their lost pet, wallet, cellphone, etc. By offering the reward, the offeror sets up a unilateral contract that stipulates that the reward will be issued once the lost pet or item is found.

Insurance contracts are another example of unilateral contracts. In an insurance contract, the insurance firm promises to indemnify or pay the insured individual a specific amount of money if a certain event happens. Since it is a unilateral contract, the insurer is not obligated to make a payment to the insured if the event does not occur.


Bilateral Contract Examples

Bilateral contracts are also very common. In fact, most business transactions that occur in our day-to-day life are types of bilateral contracts. Whether it is going to work and receiving compensation or going to a restaurant and paying for a meal, you are taking part in a bilateral contract.

In the work scenario, there is a contract between the employee and the employer, where the employee gets compensated for completing a set of tasks or achieving a goal as stipulated in their work contract.

In the restaurant scenario, the customer is obliged to pay the restaurant for the meal they ordered. The restaurant is obligated to feed the customer, who is promising to pay.


More Resources

CFI is the official provider of the global Commercial Banking & Credit Analyst (CBCA)™ certification program, designed to help anyone become a world-class financial analyst. To keep advancing your career, the additional CFI resources below will be useful:

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