Bilateral vs. Unilateral Contracts: How Do They Differ?

Bilateral vs Unilateral Contracts: How Do They Differ?

Did you know that most contracts can be classified as either unilateral or bilateral? You are probably more familiar with a bilateral contract, which is an agreement signed by two more parties. On the other hand, when you sign up for a subscription service like Netflix, you enter into a unilateral contract.

Understanding the key points of each can help you make better decisions the next time you sign a contract. In this article, we’ll compare unilateral and bilateral contracts. We’ll also look at examples of each and explore ways to create and manage contracts online.

 

Table of Contents

 

What Is a Unilateral Contract?

In a unilateral contract, only one party is bound by the terms and conditions of the offer. The offer is generally made to a group of people or a specific person. These contracts are advantageous to the entity making the offer because they can reach a larger audience.

For a unilateral contract to be valid, the other party must accept the offer by performing the requested action, like signing an online form or clicking “I agree.” Suppose the entity who offers need didn’t fulfill their side of the bargain. In that case, the contract is void.

Here are examples of unilateral contracts:

Reward contract

One common use of unilateral contracts is in the case of a reward. For example, the police may offer a reward for information leading to the arrest of a criminal.

Insurance contract

When you sign up for insurance, the company agrees to provide coverage if something bad happens, like your house catching on fire. In return, you agree to pay them a monthly premium.

Service contract

When you hire someone to do a job, like painting your house, you enter into a service contract. The painter agrees to do the job, and you agree to pay them an agreed-upon sum.

Subscription contract

A subscription contract is an agreement between a customer and a merchant that establishes the terms of a recurring purchase. This can be anything from a streaming service like Netflix to a software service like Adobe Creative Cloud.

Let us now take a look at the other type of contract — the bilateral contract.

What Is a Bilateral Contract?

A bilateral contract is a binding agreement where each party is bound to fulfill their obligations. This type of contract is more common than unilateral.

If one party does not follow the agreement in a bilateral contract, the other party is not obligated to follow the agreement either. This makes bilateral contracts more reliable because both parties have something to lose if they break the agreement.

Here are examples of bilateral contracts:

Purchase contract

A purchase contract is an agreement between a buyer and a seller to exchange goods or services for an agreed-upon sum of money. This type of contract includes a clause that specifies what will happen if the buyer or seller fails to fulfill their obligations.

Employment contract

An employment contract is an agreement that establishes the terms and conditions of employment, like salary and benefits. This type of contract protects the interests of both the employer and the employee.

Lease contract

A lease contract is an agreement between a landlord and a tenant that establishes the terms of a rental arrangement. This contract includes clauses that specify what will happen if the tenant fails to pay rent or damages your property.

What’s the Difference Between Bilateral and Unilateral Contracts?

What’s the Difference Between Bilateral and Unilateral Contracts?

We’ve laid out what unilateral and bilateral contracts are, but what’s the significant difference between the two?

Parties involved

One of the significant differences between these two types of contracts is the number of parties promising to do something. There is only one party in a unilateral agreement and two parties promising to do something in a bilateral contract.

Obligations

When discussing the obligations of parties, both parties are bound to fulfill their commitments in a bilateral agreement. But in a unilateral contract, only the person who makes the offer is legally bound to fulfill their obligations given that the conditions are met.

Enforceability

If one party breaches a bilateral contract, the other party can take legal action to enforce the agreement. If one party breaches a unilateral contract, the other party is not legally obligated to fulfill their side of the deal.

Use

Bilateral contracts are more common in business transactions than unilateral contracts. The typical use of a unilateral contract is where one party offers a reward, like a bounty, for information leading to completing a task.

Conditions

The conditions of a unilateral contract must be met before the offer can enforce the agreement. However, in a bilateral contract, the parties must uphold their end of the deal once they sign the agreement.

Now that we’ve gone over the key differences between unilateral and bilateral contracts, let’s go over their similarities.

What Are the Similarities Between Bilateral and Unilateral Contracts?

Legally binding

If one party breaks the contract, the other party can take legal action to enforce the agreement. It is valid for both unilateral and bilateral contracts.

Require an offer

An offer is when one party proposes to another party. The other party can either accept or reject the bid. The offer is what forms the basis of the contract.

Breaches are possible

Breaches can happen in both unilateral and bilateral contracts. A violation is when one party doesn’t uphold their end of the agreement.

Contract Management Made Effortless Using Fill

Contract Management Made Effortless Using Fill

If you find that contract processes are proving painful for you to manage, then you should use Fill. This contract management software offers you a way to manage all your business agreements in one place.

Legally binding eSignatures

Fill offers a legally binding eSignature service that complies with standards like HIPAA, GLBA, E-Sign Act, UETA, and GDPR. Request and sign documents electronically with confidence and security as signing a physical document.

Customizable templates

We offer a range of professionally-drafted templates that you can use for your transactions. Our templates can provide a starting point for drafting your contract and can help to save you time and effort.

Audit logs and reports

Know who accessed it, when, and from where with Fill’s real-time audit trails and log feature. Automating audit reports will ensure that every party is on the same page.

Real-time updates

Instant alerts and notifications can help you stay on top of everything. Don’t miss a beat with our in-app notifications. You’ll always know when a document has been viewed, signed, or completed.

Cloud-based storage

Using Fill’s cloud-based repository ensures that your contracts are always accessible and easy to manage. Plus, a cloud-based repository provides an extra layer of security, protecting contracts from tampering or accidental deletion.

Whether you’re looking for a way to manage your unilateral or bilateral contracts, Fill can help. Start simplifying the contract process with our all-in-one contract management solution.

Get a free demo today.

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