Unilateral & Bilateral Contracts

Thursday, Jan 29, 2009 11:05 pm
William Barnes

I think people enjoy naming things. That’s why we create distinctions even when they don’t seem to serve a practical purpose; it gives us more things to name. Unilateral and bilateral contracts, for example.

But first, an extremely short bit on offer and acceptance. Pretty straightforward: someone makes an offer—that is they signal somehow that they would agree to some set of terms–and then somebody else accepts the offer–by signalling that they also agree to those same terms.

A bilateral contract is one in which these terms set out obligations for both parties. The parties agree and then each carries out his own side. In a unilateral contract, only one party has obligations. Now, we know—or, at least, as far as I know—you can’t make a one-sided contract. Both parties are supposed to get something. So such a contract is formed where the act of acceptance and the fulfilment of one party’s notional duties under the contract are the same act. The example Professor Benson seems to enjoy is this: A says to B “I will give you $10 if you mow my lawn.” B, in this case, would accept by mowing the lawn. At that point, A would be contractually obligated to pay B even though B was never contractually obligated to anything.

It seems to me that any offer that could give rise to a unilateral contract could quite easily be accepted and a bilateral contract created. Imagine that B had replied: “OK, I will mow your lawn for $10.” Would that not create a contract such that A could expect the mowing and B the $10? The important thing to take from this is that the phrases unilateral and bilateral contract have no meaning until the contract exists. The most you can say is that some contracts allow a method of acceptance that simultaneously fulfils the second party’s obligations. But what, from the post-contract perspective, is the difference between a unilateral contract and a bilateral contract in which one party fulfils their side first?

We haven’t covered consideration but the hints we have received about it give me hope that I will be able to further explain my discomfort once we do.