The Difference Between Unilateral and Bilateral Contracts

Contracts are the foundation of any business but these agreements typically fall under two types: bilateral or unilateral contracts. Both types are enforceable under the contract law in Utah. The differences between the two depend largely on the structure of the agreement and the legal formation of the contract. Below, one of our Utah business law attorneys explains in further detail.

What is a Unilateral Contract?

A unilateral contract is an agreement in which one party promises to provide compensation or a reward after the other party completes a specific action or task. These contracts are characterized by a promise that is only made by one party. Only the party that offers consideration or payment is contractually obligated until the task is completed, which makes unilateral contracts inherently one-sided.

There is a very simple example of unilateral contracts that can make them easier to understand. The owner of a dog may publicly offer a reward for the return of the pet. The owner does not have a legal duty to fulfill the promise of the payment until the dog is located and returned. People who want to earn the reward must do so by finding the lost dog and returning it, essentially fulfilling the conditions outlined in the contract.

After the dog is returned, the condition is met and so, the agreement becomes enforceable. The owner has a duty to provide the promised reward.

What is a Bilateral Contract?

Bilateral contracts, on the other hand, are the most common type encountered in business transactions. Bilateral contracts involve both parties making promises to each other, resulting in obligations that are reciprocal. One of the simplest examples of a bilateral contract is that of diners in a restaurant and the establishment itself.

When you eat at a restaurant, there is an implied bilateral contract with the business. As soon as you sat down and ordered food, you made an implicit promise to pay for the meal you consume. Likewise, the establishment has an obligation to provide you with the food you ordered in exchange for the payment you will provide after you receive the bill. While no formal contracts are signed at restaurants, the actions of both sides constitute a binding agreement that the courts will recognize.

Consideration in Contracts

In contracts, consideration refers to the benefit each side will receive from participation in the transaction. It is one of the most important elements contracts must have in order to be enforceable. In the example of the unilateral contract with the lost dog, both sides are given consideration even though only one side gives something up. In bilateral contracts, each side also has consideration. The restaurant receives payment while the diners receive a meal that is prepared for them.

Our Business Law Attorneys in Utah Can Draft Your Agreements

Regardless of the type of contracts you are drafting, it is critical that these documents are executed properly to ensure they are enforced. At AGS Law, our Utah business law attorneys can protect the best interests of you and your company so you can enforce provisions in the future. Call us now at 801-477-6144 or contact us online to schedule a consultation and to learn more about how we can help.

Source:

le.utah.gov/xcode/Title15/C15_1800010118000101.pdf