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What is a unilateral contract, and is it safe?

On Behalf of | May 12, 2023 | Business & Commercial Law, Contract Disputes

Unilateral is a type of business contract that you could draft in New York. The parties entering a unilateral contract don’t have to follow through unless one of them begins to complete the requested work. In a bilateral contract, the worker can’t change their mind later because of contractual obligations.

What is a unilateral contract for?

People who are paying another person to complete a certain task for them might draft a unilateral contract. They may use this type of contract to make an optional offer. The offeree isn’t obligated to complete the task, and the offeror isn’t required to stay in the contract until the offeree performs the work. They could withdraw their offer. However, once the person starts work, the other party has to pay them upon completion.

Insurance policies are another example of a unilateral contract. The insurer agrees to pay if certain events happen to the insured.

Offering a reward for help in catching a criminal is also a unilateral contract. It’s an open offer that the offeror will fulfill if someone can meet the requirements. An agreement between two people for one to pay the other for mowing their lawn or walking their dog is an informal agreement, but it’s still a contract.

What makes a unilateral contract enforceable?

Although not all unilateral contracts are formal, they are enforceable if they are valid under New York’s business law. Both parties must have the mental capacity to enter a contract. They need to understand their obligations and agree to the contract. Coercion or fraud would invalidate it. Thirdly, each party must benefit from the contract. One person is giving a service in exchange for something of value. Contracts can’t be one-way streets.

You’ve probably participated in a unilateral contract without realizing it. They are a common type of contract because insurance policies and paying for gig work are unilateral. Thus, they are a safe type of contract when you use them for their intended purpose and understand how they work.