Which type of contract requires one party to perform an action in exchange for a promise?

A unilateral contract is characterized by the requirement that one party performs an action in exchange for a promise from the other party. In this type of agreement, one party makes a promise that the other party can accept only by performing a specific act. For example, if someone offers a reward for the return of a lost item, the promise of the reward is contingent upon the action of returning the item.

This type of contract highlights the distinction in obligation; only the party making the promise has a duty until the action is completed. The contract is established when the action is performed, not when the promise is made, which differentiates it from other contract types, such as bilateral contracts, where both parties exchange promises to perform.

Understanding the nuances of contract types is crucial in the realm of commercial contracts, as it influences how obligations are defined and enforced in various contractual relationships.