What Is Unilateral Contract: Process and Type (2025)

May 20, 2025
12:32 pm

6 min read

When we think of contract process, we often envision a mutual agreement where all parties exchange promises and undertake specific obligations. However, not all contracts follow this bilateral contract structure. In some instances, only one party makes a binding promise these are known as unilateral contracts, which are accepted and enforced through the performance of the requested act rather than a reciprocal promise.

Contracts come in various forms, each tailored to meet different needs and scenarios across industries. Among these, certain agreements stand out for their unique structure and application.

In this blog, we will explore this distinctive unilateral contract, uncovering its key features, real-world uses, and important considerations.

Key Takeaways,

A unilateral contract is when one side makes a promise to do something only if the other side does a certain task.

It helps encourage someone to act without needing a promise back.

Using automation tools can make making these contracts faster and easier.

What Is a Unilateral Contract?

A unilateral contract is a type of agreement where only one party makes a clear promise. The other party does not make any promise in return but can accept the offer by completing a specific agreement task or action. The contract is considered fulfilled once that task is completed.

In simple terms: one party states, “We will pay if this task is completed,” and the other party accepts by performing the required work.

Example: Manufacturing Project

Consider a company that needs 1,000 custom parts for its machines. Instead of signing a contract upfront, the company announces: “We will pay $5,000 to anyone who delivers these parts by the end of the month.”

Here, the company promises to pay $5,000. The manufacturer does not make any prior commitment but accepts the offer by delivering the parts as specified. Once the parts are delivered on time and meet quality standards, the contract is fulfilled, and payment is due.

This example clearly illustrates how a unilateral contract operates.

Also Read: What Is Contract Obligation Management

Examples of Unilateral Contracts

To gain a clearer understanding, consider the following examples.

1) Insurance Policies

Insurance policies are a common example of these contracts. These contracts become valid only when a certain event happens.

For example, an insurance company promises to pay a sum of money if a specified event occurs. The person who buys the policy is responsible for paying regular premiums but does not have any other obligations. They can also cancel the policy at any time without facing legal issues.

2) SaaS Software

Free trials offered by SaaS and software companies are a common example of unilateral contracts. These trials allow users to access a service at no cost for a limited period.

The company makes a promise to provide access to the software during the trial. This offer becomes effective when a user begins using the service. However, the user is not legally obligated to use the software for the entire duration or to continue with a paid plan once the trial ends.

In this setup, the commitment comes solely from the service provider, making it a clear example of a unilateral agreement.

Also Read: Benefit of SaaS Contract Management

3) Performance Based Reward Bonuses

Performance-based reward bonuses are a common example of unilateral contract in the workplace. In such cases, an employer offers a reward or bonus when certain goals or targets are achieved.

For example, a company might promise a bonus to any team member who reaches a specific performance milestone. There is no obligation for employees to participate, but if someone meets the set criteria, the company is required to provide the promised bonus. This might be bonus offered to employees or Sport team.

Why Unilateral Contract Matter - Importance

It play a key role in many every day and business situations. They allow one party to make a promise that becomes legally binding only when the other party completes a task. This creates flexibility and encourages action without needing both sides to agree upfront.

For example, businesses can offer payment, free trials, or performance bonuses with clear terms. These contracts help build trust and fairness because the person or business making the offer must keep their promise once the action is done.

They are important because they are simple, practical, and work well in many real-life situations, from promotions to service trials. They make it easier to offer something valuable without needing a formal agreement from everyone involved right away.

This type of structure makes it easier to take quick action and see faster results. It is especially useful when the offer is open to many people or when the one making the promise does not know who will respond. Whether it is aimed at the public or a large group, it helps keep the process smooth and efficient.

Core Elements of a Unilateral Contract

To fully understand this, it is important to first explore the core elements that make these agreements unique and effective.

1) Offer

It begins when one party clearly states a promise, inviting others to accept it by completing a specific task or action. This offer sets the terms and lets anyone who is willing take part by fulfilling the requirement.

The promise clearly states what will be done if the task is completed.

The offer is open to anyone who chooses to perform the task.

The offer remains valid until someone fulfils the required action.

2) Acceptance

Acceptance in this is unique because it happens only when the other party carries out the requested task. Unlike other contracts where acceptance is a verbal or written agreement, here acceptance is shown through action. This means the contract becomes binding only after the task is done. Performing the requested action counts as agreeing to the contract.

Acceptance must be done freely and without any pressure.

The contract becomes valid only after the task is successfully completed.

3) Consideration

Consideration means something of value that each party gives or promises in a contract. For example, in an insurance policy, the policyholder pays premiums, which is the value given to the company. In return, the insurance company promises to provide coverage, which is their part of the agreement. This exchange of value is what makes the contract fair and legally binding.

Consideration involves a mutual exchange where both sides give something important.

It make sure that each party has a reason to fulfil their promise.

It shows that both parties are serious and committed to the agreement.

4) Intention

Both parties in a unilateral agreement willingly and clearly express their intention to form a strong legal agreement. The offeror confidently promises to complete their commitment once the offeree successfully completes the required action.

The offeror’s clear and positive intention builds trust in the agreement.

The offeree’s performance confidently confirms acceptance of the offer.

Both parties share a mutual understanding that the contract carries meaningful legal weight.

5) Certainty

The terms of a unilateral contract need to be clear and detailed so both parties fully understand their rights and contractual obligations. If the offer is vague or unclear, it can cause confusion about what exactly is required to earn the promised reward. Clear and specific language ensures the contract is fair and can be upheld if there is a dispute.

The contract clearly explains the actions needed to meet the contractual obligations.

Both parties understand their rights and responsibilities, which helps avoid confusion.

Clear terms strengthen the contract and make it easier to enforce when necessary.

Comparing Unilateral and Bilateral Contracts

Contracts form the foundation of countless business and personal agreements worldwide, but not all contracts operate in the same way. Knowing the key differences between unilateral and bilateral contracts helps clarify how promises are made and fulfilled in different situations, leading to clearer and more effective agreements.

Unilateral Contract

It is a one-sided promise. One person or business makes a promise, and the contract is completed only when someone else performs a specific task. The second party is not required to act but if they do, the first party must keep their promise.

Example: A company says it will pay $100 to anyone who completes the project. If someone does it, the company must pay.

Bilateral Contract

A bilateral contract is a two-sided agreement. Both parties make promises to each other and are expected to follow through. It is the most common type of contract used in business and daily life.

Example: A business signs a deal with a supplier to buy raw materials. The business promises to pay, and the supplier promises to deliver the goods.

Different Types of Unilateral Contract

We have covered the differences between unilateral and bilateral contracts. unilateral agreements are typically classified by how they function, not merely by the industries or scenarios where they are used. Below are the key distinctions.

1) Reward-Based Contracts

These contracts involve an open offer to a broad audience, promising a reward when a specific action is completed. No one is obligated to respond, but the offeror is required to fulfill the promise once the action is performed.

The offer is accessible to anyone who chooses to participate.

Acceptance occurs only when the action is fully completed.

The offeror is legally bound to honor the promise after performance.

2) Performance-Triggered Contracts

Here, the contract depends on the successful completion of a defined task. The promise becomes binding only after the task is done, motivating the offeree to fulfill the requirement.

The promise hinges on finishing a specific activity.

Acceptance is through completing the agreed-upon task.

The offeror provides the agreed payment or reward after performance.

3) Condition-Dependent Contracts

These contracts are activated only when certain conditions or events take place. The promise remains inactive until those predefined conditions are met, make sure fairness and clarity.

The contract’s enforceability depends on specific conditions being fulfilled.

The promise becomes effective only after conditions are satisfied.

It helps manage risks by clearly defining triggering events.

4) Open Public Contracts

This category includes offers that are open to anyone who meets the stated terms. Acceptance is achieved through completing the required action, rather than by explicit agreement.

Offers are available to a wide or general audience.

Acceptance happens only through the performance of the task.

The offeror must fulfil the promise once the conditions are met.

Challenges Faced During Unilateral Contract

While it is useful and common, can present several challenges that both parties need to consider.

1) Uncertainty About Acceptance

One of the main challenges with this type of agreements is that acceptance only occurs when the specified action is fully executed. This can create uncertainty for both parties, as it may not be immediately clear when or if the offer has been accepted. Without clear evidence of performance, this unclarity can lead to confusion or delays in fulfilling the agreement.

2) Limited Control Over Who Accepts

Since these kind of contracts often invite anyone who meets the conditions to accept, the offeror may have little control over who performs the required task. This openness can result in multiple parties attempting to fulfill the terms, which may make it difficult to track and confirm the rightful recipient of the contract benefits.

3) Clear Definition of Complete Performance

It is crucial that the terms of the contract clearly specify what constitutes full completion of the task. If the requirements are vague or open to interpretation, disagreements may arise regarding whether the offeree has successfully met all the conditions. Clear and precise language helps minimize misunderstandings.

Also Read: Importance of Clause Library

4) Challenges with Timing and Deadlines

Without a clearly stated deadline, the offeror could be obligated to honour the contract even if the action is completed much later than anticipated. This can create practical challenges, especially if circumstances change over time, affecting the feasibility or relevance of the offer.

5) Legal Complexity in Enforcement

Because unilateral agreements depend on one party completing a task to accept the offer, there can sometimes be challenges when it comes to legal enforcement. Courts may need to assess whether the completed performance aligns exactly with what was promised, which could lead to disputes or delays in upholding the contract.

Best Practices to Implement Unilateral Contract

To make these contracts effective and fair, following certain best practices can help avoid confusion and build trust between everyone involved.

1) Write Clear and Specific Terms

The first and most important step is to clearly describe what needs to be done. The offer should explain the exact action or result required to earn the promised reward or payment. When the terms are precise, it leaves no room for misunderstanding.

For example, if the contract involves completing a project, specify what the project includes, how it will be evaluated, and any quality standards expected. Clear instructions help everyone know exactly what is expected.

Recommended Read: How to Draft a Contract

2) Communicate the Offer Publicly and Transparently

If the contract is open to multiple people or the public, make sure the offer is easy to find and understand. Sharing the details openly allows anyone interested to participate. Transparency also shows honesty and builds confidence in the offer. For businesses, posting the offer in clear language on websites, social media, or public notices helps reach a wide audience and invites fair competition.

3) Set a Reasonable Time Frame

Deadlines are very important in in these agreements Specify the exact period within which the action must be completed. This avoids any uncertainty about when the offer expires or when the promised reward should be given.

A reasonable deadline encourages timely responses and helps both parties plan their schedules properly. It also prevents the contract from dragging on indefinitely, which can cause frustration.

4) Be Ready to Follow Through Promptly

Once the person or party completes the required action, it is important for the offeror to respond quickly and honor the promise. Paying the reward or providing the agreed compensation without unnecessary delay shows fairness and respect.

Prompt action builds a positive reputation and encourages others to participate in future offers. It also strengthens trust in the relationship between both parties.

5) Keep Records of the Process

Maintaining clear records of the offer, any communications, and proof of completed work protects both sides. Documentation can help solve any disagreements if questions arise later. For example, saving emails, signed contracts, or completion reports ensures that all terms are clear and verifiable. This practice brings clarity and peace of mind for everyone involved.

6) Maintain Open Communication Channels

Encourage participants to ask questions or request clarification before and during the process. Being available to communicate openly helps avoid mistakes and misunderstandings. It also shows that the offeror values transparency and respects the effort of those taking part. Good communication leads to smoother transactions and better outcomes.

7) Review and Learn from Each Contract

After the contract is fulfilled, take time to reflect on what went well and where improvements can be made. Understanding the challenges or successes in each case helps refine future offers. Continuous learning from experience allows the offeror to design clearer contracts and handle the process more effectively next time.

By following these best practices, it can be handled confidently and fairly. Clear and specific terms, open communication, reasonable deadlines, and prompt fulfilment create a positive experience for all parties. These steps help build trust and encourage participation, making unilateral contracts a useful tool in many situations.

Benefits of Utilizing Unilateral Contract

It offers unique advantages by allowing one party to make a promise that becomes enforceable only when the other party performs a specific act. Below, we explore the key benefits of unilateral agreements, presented clearly to highlight their practical appeal.

1. Clear Expectations for All Parties

It sets straightforward terms. The party making the promise, known as the offeror, outlines a specific action they want, such as completing a task or achieving a goal. The other party, the offeree, knows exactly what’s required to earn the reward. This clarity reduces confusion and aligns expectations.

For example, A real estate developer offers a fixed payment to any contractor who successfully completes a property inspection. The agreement becomes binding only when a contractor fulfils the task, making it a clear example of a unilateral agreement.

Also Read: Real Estate Contract Management Software Benefits

2. Encourages Action and Results

These contracts are powerful motivators. Since the reward is tied directly to completing the specified action, they inspire individuals to take initiative. Consider a company promising a bonus to the first employee who designs a winning product prototype. This setup sparks creativity and effort, as the prize depends on delivering results.

Unilateral contracts naturally drive performance, making them ideal for contests, promotions, or goal-oriented tasks.

3. Flexibility for the Offeror

This give the offeror control and adaptability. They can craft the terms to suit their needs and revoke the offer before anyone completes the action, provided they communicate the change clearly. This flexibility allows businesses or individuals to adjust their plans without being locked into obligations until the task is done.

For instance, a homeowner offering a reward for finding a lost pet can modify or cancel the offer if circumstances change, maintaining freedom while still encouraging help.

4. Low Risk for the Offeree

For the person accepting the challenge, it carries minimal risk. They are not obligated to act participation is entirely their choice. If they decide to pursue the reward, they invest only the effort needed to complete the task, with no upfront commitment or penalty for walking away. This low-stakes structure makes these agreements appealing to participants.

5. Builds Trust Through Performance

It fosters confidence between parties. The offeror demonstrates good faith by promising a reward, while the offeree proves their capability by completing the action. This performance-based exchange strengthens relationships, especially in professional settings. This mutual trust can pave the way for future collaborations.

6. Cost-Effective for the Offeror

From a financial perspective, this type of contracts are efficient. The offeror pays only when the desired outcome is achieved, avoiding expenses if no one completes the task. This results-driven approach maximizes value.

Leverage CLM 365 to Handle Your Contract Workflow

CLM 365 is a Microsoft-certified solution designed to seamlessly integrate with Microsoft Teams, Outlook, Power BI and SharePoint. This powerful combination allows businesses to handle their contract processes smoothly within familiar platforms.

With its user-friendly interface, it makes managing agreements easy and accessible for all team members. At the same time, it offers high-level security features to protect sensitive information, giving businesses peace of mind.

By using CLM 365, companies can improve efficiency, reduce errors, and keep contracts organized all while working within a trusted Microsoft ecosystem.

Conclusion

In summary, unilateral contract play an important role in many business and everyday situations by allowing one party to make a promise that becomes binding only when the other party completes a specific action. Understanding how these contracts work helps individuals and businesses make better decisions.

Book a free demo today and discover how CLM 365 can transform the way you handle contracts.

Frequently Asked Questions

What are the two requirements of a unilateral offer?

The two requirements are one party must make a clear promise, and the other party must complete the requested action to accept the offer.

Do you need consideration for a unilateral contract?

Yes, consideration is needed. The person making the promise must receive something of value, usually the completed action from the other party.

Is a lease a unilateral contract?

No, a lease is usually a bilateral contract because both the landlord and tenant make promises to each other.

Can you modify a unilateral contract?

In a unilateral contract, changes to the terms are usually allowed only if the original agreement clearly allows for it or if the offer is withdrawn before the other party starts the task. These contracts involve one party making a promise that becomes binding only when the other party completes a specific action.