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Unilateral Contract: Definition & Example

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Lesson Transcript
Instructor: Jessica Schubert

Jessica is a practicing attorney and has taught law and has a J.D. and LL.M.

Once you complete this lesson, you'll have an understanding of what a unilateral contract is. You'll examine the definition of unilateral contract, as well as review an example.

Definition of Unilateral Contract

Imagine that you enter into an agreement with your friend to cook for a party she is having at her home. You decide to put the agreement in writing. Your friend gives you a piece of paper which includes the following: 'I will pay you $2000 after you cook dinner for me and my friends on Thursday.' You agree to do the cooking, but your friend does not perform any act in exchange; she will simply pay you the $2000 once you complete the meal. This is an example of a unilateral contract.

A unilateral contract is an agreement which is one-sided; in other words, one person makes a promise to do something while the other does not take action immediately. Rather, the other party will act in the future. Examples of unilateral contracts include contests. Take an eating contest, for instance. A restaurant advertises that they will give you a free meal if you eat a five-pound steak. You agree and eat the steak. After you eat the steak, the restaurant then must give you the free meal as promised.

In addition, once the acting party takes the action promised in the agreement, the other party must act because the promise is now enforceable. If the party does not act as promised, he/she will be in breach of the unilateral contract.

For instance, in the example where you cook the dinner, once you cook the dinner, your friend must then pay you for your services. If your friend fails to pay you as agreed, your friend will be in breach of the agreement.

Unilateral contracts are distinguished from what is known as a bilateral contract. Bilateral contracts are the most frequently utilized type of contracts. In a bilateral contract, each party exchanges mutual promises. For example, one party agrees to pay a certain amount in exchange for the other party's agreement to supply goods or services.

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