Unilateral Contract

A unilateral contract is a one-sided, legally binding agreement in which one party promises to compensate another party if they perform a specific task or action. The compensation doesn't have to be a monetary payment, as long as it’s specified in the contract and understood by both parties.

Unlike a bilateral contract, only the offeror is bound at the outset; the other party has no obligation to act. The contract becomes enforceable the moment the requested performance is completed.

How a unilateral contract works

The offeror makes an offer that can be accepted only by performance. The offeree does not have to promise to act. Instead, the offeree accepts by completing the specific act required by the offer.

A unilateral contract often follows this sequence:

• The offer is made: One party promises to pay, deliver, or provide something of value if another party completes a specific act.
• The offeree performs: The other party chooses whether to complete the requested act.
• Performance creates acceptance: The completed act serves as acceptance of the offer.
• The offeror becomes bound: Once the required performance is completed, the offeror generally must fulfill the promise.

Once performance has begun, many courts require the offeror to give the offeree a reasonable opportunity to complete the act. The exact rule can vary by state, offer terms, and facts.

Common examples

Unilateral contracts arise in everyday business and personal contexts wherever one party offers a reward or benefit in exchange for a specific action.

• Insurance policies. The insurance company pays the policyholder if an event occurs that meets the contract's terms of coverage.
• Reward offers. An offeror makes an open request—such as for help finding a lost pet—and only gives the reward if another party finds the pet.
• Contest prizes. The contest board gives prizes to participants who achieve a specific outcome, such as in an art or piano contest. 
• Unilateral nondisclosure agreements (NDAs). One party discloses information, and the other party maintains confidentiality as the performance-based acceptance of the offer.
• Real estate agreements. The seller pays a real estate agent a commission if the agent successfully sells the property.

Unilateral vs. bilateral contract

A bilateral contract involves mutual promises. Each party commits to do something at the time the agreement is formed. Most written business contracts, including many service agreements, vendor contracts, and purchase agreements, are bilateral.

In a unilateral contract, only the offeror makes the promise at first. The offeree does not have to act. Acceptance happens through completed performance. This distinction matters when drafting reward offers, contests, bonus plans, commission programs, or promotional offers.

Related terms

These related terms can help explain how unilateral contracts connect to offer, acceptance, and performance:

• Offer: An offer is a proposal to enter into a contract on specific terms.
• Acceptance: Acceptance is the offeree’s agreement to the offer’s terms. In a unilateral contract, acceptance occurs through performance.
• Consideration: Consideration is something of value exchanged as part of a contract.
• Breach of contract: A breach of contract occurs when a party fails to perform a required contractual obligation.

FAQs about unilateral contract

Is a unilateral contract enforceable without a signed agreement?

Often, yes. A unilateral contract may be enforceable without a signed agreement if the offer is clear, the required act is completed, and the basic contract requirements are met. However, some contracts must be in writing and signed to be enforceable, and written terms are often important for proving what was offered.

What happens if the terms are vague?

Ambiguous terms make the contract difficult or impossible to enforce because a court cannot determine whether the required act was completed or what the offeror owes. This is why attorneys recommend putting the terms of any bonus program, commission structure, or promotional offer in writing before it goes out.

Can a unilateral contract be breached?

Yes. A breach can occur if the offeree completes the required performance and the offeror refuses to provide the promised payment, prize, reward, or other benefit. The available remedy depends on the offer, the type of contract, and applicable law.