# Understanding Unilateral Contracts: Key Types and Legal Elements

![A close up showing the arms and hands of two people at a desk while one of them reads over an insurance policy before signing the document.](https://www.investopedia.com/thmb/d-glGmLaZwsMjr4KEB4Gf2mka7w=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/UnilateralContract-b99cf26cae834b8e8d350aa5d1e25ad3.jpg)

*— shapecharge / Getty Images*

## What Is a Unilateral Contract?

A unilateral contract is a one-sided agreement where only the offeror is legally bound, promising to pay or perform once the other party completes a specific task. Unlike [bilateral contracts](https://www.investopedia.com/terms/b/bilateral-contract.asp), where both sides exchange mutual obligations, a unilateral contract places responsibility on just one party until the task is fulfilled.

Common examples include insurance policies, where the insurer agrees to pay if a covered loss occurs, or promotional offers like banks offering cash bonuses when customers meet certain conditions. For the contract to be legally binding, it must include a clear offer, acceptance through performance, and lawful consideration.

### Key Takeaways

*   Unilateral contracts involve only one party, the offeror, who is obligated to fulfill a promise once the offeree completes a specified task or act.
*   In contrast to bilateral contracts, unilateral contracts imply no obligation on the offeree's side to complete the task or even accept the offer.
*   Common examples of unilateral contracts include reward offers and certain insurance policies, where performance leads to payment or coverage.
*   To be legally binding, a unilateral contract must have clear agreement terms, consideration, intention to create a legal obligation, and certainty in performance requirements.
*   Unilateral contracts can be revoked before performance begins, emphasizing the importance of communication between the offeror and offeree.  
    

## How Unilateral Contracts Operate: Key Features

Unilateral contracts occur when the offeror makes an offer to another party. This type of contract requires the offeree to perform an act that the offeror requests. The offeree has no obligation to complete the task and the offeror will only pay if the request is completed.

Unilateral contracts are enforceable by [contract law](https://www.investopedia.com/articles/pf/06/insurancecontracts.asp), but legal action is rare unless the offeree claims they deserve payment.

[Contract breach](https://www.investopedia.com/terms/b/breach-of-contract.asp) depends on whether or not the terms of the contract were clear and if it can be proven that the offeree is eligible for payment of specified acts based on the unilateral contract’s provisions.

## Exploring Different Types of Unilateral Contracts

Unilateral contracts are mainly one-sided, with no obligation for the offeree. Common examples include open requests and insurance policies.

### Open Requests

Offerors use unilateral contracts for broad requests, paying only when specific conditions are met. If an offeree completes the task, the offeror is required to pay.

Rewards are a common type of unilateral contract request where information received may lead to a criminal's conviction that will warrant a payment. Funds can be paid to a single individual or several individuals offering information that serves this specific purpose.

Unilateral contracts are common in [labor requests](https://www.investopedia.com/terms/l/labor-market.asp), like paying someone to clean a house or walk a dog, with payment made upon task completion.

### Insurance

[Insurance](https://www.investopedia.com/terms/i/insurance.asp) policies are unilateral because the insurer promises to pay if certain events occur under the contract. In an insurance contract, the offeree pays a premium specified by the insurer to maintain the plan and receive coverage if a specific event occurs.

## Essential Elements of a Legally Binding Unilateral Contract

To make a unilateral contract legally binding, four elements must exist:  

### Agreement

One party makes an offer to another party and both must accept the offer, without coercion or force from either side.  

### Consideration

Consideration is the price paid for the promise or agreement and it does not need to be a monetary payment. Consideration can be any type of property or holding that both parties agree to warrant acceptable payment.  

### Intention

Both parties must intend to create a binding contract and understand its terms and conditions  

### Certainty

Both parties must fully understand what must happen to complete the terms of the contract. In a unilateral contract, an action or task will need to be completed for the contract to be fulfilled.  

## Comparing Unilateral and Bilateral Contracts: Key Differences and Obligations

Contracts can be unilateral or bilateral. In a unilateral contract, only the offeror has an obligation. The offeree is not required to complete the task or action.

In a bilateral contract, both parties agree to an obligation and involve equal obligation from the offeror and the offeree. In general, the primary distinction between unilateral and bilateral contracts is the amount of reciprocal obligation from both parties.

## How Do You Know If a Contract Is Unilateral?

A unilateral contract does not obligate the offeree to accept the offeror's request and there is no requirement to complete the task. A bilateral contract, however, contains firm agreements and promises between two parties.

## Can You Break a Unilateral Contract?

In a unilateral contract, the offeror may revoke the offer before the offeree's performance begins and this change should be expressed to the offeree before any task is started.

## Are Unilateral Contract Mistakes Enforceable?

If a mistake occurs during a unilateral contract, some remedies for a mistake include contract reform where the contract is changed or a new contract is started, or full contract cancellation.

## The Bottom Line

In a unilateral contract, the offeror is only obligated to pay once the specified task is completed, while the offeree is under no obligation to act at all. If the offeree does choose to perform, however, the offeror must honor their promise. This makes unilateral contracts different from bilateral ones, where both parties are bound by mutual obligations.

They are often seen in reward offers, insurance agreements, or optional service requests, where one party promises payment only if certain conditions are met. As long as the terms are clear, unilateral contracts are legally enforceable, making them a useful tool in industries like finance, insurance, and labor markets, where one-sided obligations are common.