Unilateral Contracts: One Promise, One Performance
What Is a Unilateral Contract?
A unilateral contract is an agreement where one party makes a promise in exchange for the other party's performance of a specific act. Unlike a bilateral contract where both parties exchange promises, in a unilateral contract only the offering party is bound — the other party accepts the offer by completing the requested action.
The Classic Example
The most commonly cited example: "I will pay $500 to anyone who finds and returns my lost dog." This is a unilateral contract because:
- Only the dog owner has made a promise (to pay $500)
- No one is obligated to search for the dog
- The contract is accepted by actually finding and returning the dog
- The owner becomes obligated to pay only once someone performs
Real-World Unilateral Contracts
- Reward offers. Any public offer of a reward for information, return of property, or a specific action.
- Insurance policies. The insurer promises to pay claims in exchange for the insured's performance of paying premiums and meeting policy conditions.
- Contest and competition rules. "Submit a design and win $10,000" — performance (submitting) creates the obligation (paying the winner).
- Option contracts. The option holder pays a premium for the right (but not obligation) to buy or sell at a set price.
- Commission agreements. Some broker agreements promise payment only upon completion of a sale.
Key Legal Issues
- Revocation before completion. Can the offeror revoke the offer after the other party has started performing but before they finish? Most courts hold that once performance begins, an implied option contract prevents revocation. The Restatement (Second) of Contracts, Section 45, supports this.
- Notice of performance. The performing party may need to notify the offeror that performance has been completed, especially in reward situations.
- Mistake about terms. Since the performing party does not sign anything, disputes about what performance was required are common.
What to Watch For
- Ambiguity about acceptance method. Is the contract accepted by a promise (bilateral) or by performance (unilateral)? This affects when obligations arise.
- Revocation risks. If you start performing under a unilateral offer, understand your rights if the offer is revoked mid-performance.
When to Consult a Lawyer
Consider consulting an attorney if you have substantially performed under a unilateral offer that was revoked before you could complete performance, or if there is a dispute about whether the terms of performance were met.
This article is for informational purposes only and does not constitute legal advice. Consult a licensed attorney for guidance specific to your situation.