What is the difference between a unilateral and bilateral contract?

A unilateral contract is defined by its structure, where one party makes a promise that is contingent upon the performance of a specific action by another party. This means that the performance of that action by the second party acts as the acceptance of the offer, leading to a binding agreement. A common example of a unilateral contract is a reward offer, where one party promises to pay for a lost pet only if someone finds and returns it.

In contrast, bilateral contracts require mutual promises and obligations from both parties involved. Each party commits to perform a duty or service, making both sides responsible under the terms of the agreement. This fundamental distinction highlights how unilateral contracts focus on a single promise in exchange for an action, while bilateral contracts encompass mutual commitments. Thus, understanding this central aspect of unilateral contracts is key to distinguishing between these two types of agreements in contractual law.