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As a business owner, you should familiarise yourself with the different ways to enter a contractual relationship. A unilateral offer can give rise to a contractual obligation. It often occurs when an offeror promises money upon the completion of a specific act. Unilateral contracts can be a good way of hiring services, running promotions, and getting an insurance policy. This article will explain what a unilateral contract is, what your contractual obligations are and provide some common examples.
What is a Unilateral Contract?
A unilateral contract is an agreement where the offeror agrees to perform their side of the bargain when the other party completes a particular act. This may appear as the offeror making an open request. For a unilateral contract to be enforceable, it must still fulfil the elements of contract formation, being:
- valid offer and acceptance;
- certainty of terms;
- mutual intention for entering into an agreement; and
- consideration.
As such, the terms of an offer for a unilateral contract must show the genuine intention of the offeror to enter into an agreement. Additionally, for some unilateral contracts, there is no need for the party accepting the contract to provide notice of acceptance; they can simply accept by performing their obligations under the contract.
Unilateral Contracts vs Bilateral Contracts
Unilateral agreements differ from bilateral agreements because they only require a commitment from the offeror. A bilateral contract becomes legally enforceable when both parties have made an offer and come to an agreement about the terms of the contract. This usually involves a written agreement, where both parties make mutual promises which results in valid contract formation.
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Examples of Unilateral Contracts
A typical example of a unilateral contract is a reward. For instance, when someone posts a reward for finding a lost pet, car, wallet, or phone, they are making a unilateral offer which will create legal relations when the offeree starts to try to complete the act.
Another example is an invitation to tender. For example, suppose you make an advertisement to consider an offer for tender. In that case, you may have created a unilateral contract where you are obliged to consider the offers you receive.
Further, you can have a unilateral contract with an insurance company for an insurance policy. In an insurance contract, the insurance firm might promise to pay you money if certain events occur. However, until the event arises, they do not have any obligation to give you anything.
Obligations in a Unilateral Contract
In a unilateral contract, legal relations between the offeror and offeree form when the offeree begins to try to complete the specified act as part of the contract. As a result, if you are the offeror, you will have a binding contract and will not be able to rescind your offer. Doing so could be a breach of contract, and the offeree may sue you for damages.
When Could I Use a Unilateral Contract?
A unilateral contract could be useful for your business in many ways. For example, you could create an invitation to tender, which is a good way of getting competing offers. Similarly, you could run a promotion through advertising an open offer. This might include a reward to anyone who collects a certain amount of tokens you give as part of a promotion.
Key Takeaways
As a business owner, it is useful to be aware of unilateral contracts. It can be a valuable way of seeking new opportunities and business partnerships. However, you may unknowingly commit yourself to contracts you do not wish to be part of. If you make an open offer, this may give rise to legal obligations. As such, you should generally seek legal advice before making a unilateral offer.
If you need help with a unilateral offer, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
A unilateral contract is a contract where an offeror agrees to perform their side of the bargain if the offeree completes a specified act.
A bilateral contract is where both parties make mutual promises to each other. In a bilateral contract, both parties will make an offer and an acceptance during a communication.
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