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Difference Between Unilateral And Bilateral Contracts Under Law Of Contract,1872

How often have you seen any promise being performed instantaneously? Maybe, when you visit a small shop and ask for something of daily use, the shopkeeper would give it to you at a fixed price that is payable immediately in cash.

But in business transactions involve promises made at one time and performance follows much later. For example, a trader asks a transporter to provide for ferrying goods for which he pays the transportation charge after a specific period. In such situations, the parties involved may go back on their promises putting the other party in trouble.

To protect the deal from such kind of problems, The Law of Contract is enacted. In plain words, it lays down the legal rules relating to the promise made, the formation of the contract, their performance, and their enforceability.

The Indian contract act defines a contract as 'an agreement enforceable by law'. Therefore, Contracts should have agreements and corresponding legal obligation to honor the agreements.

Now, one must think about what is an agreement?
When a person to whom a proposal is made signifies his acceptance, it results in an agreement.
Hence, the main component of the Agreement is offer and acceptance. It is obvious that there should be more than one party to come to an agreement and all the parties should think of the same thing in the same manner. This is known as 'meeting of minds'.

For example, a person is willing to sell a racehorse to another person and the other person is ready to buy a working horse. So, here they both are not on the same page because one is selling a racehorse and the other person needs a working horse.

There are different types of contract on the basis of
  • its enforcement
  • mode of creation/formation
  • extent of execution
  • nature of consideration
Within this unilateral and bilateral contract comes under the basis of the nature of consideration.

Unilateral contract:
A unilateral contract is a contract agreement in which an offeror promises to pay after the occurrence of a specified act. In general, unilateral contracts are most often used when an offer or has an open request in which they are willing to pay for a specified act.

An example of a unilateral contract is an insurance policy contract, which is usually partially unilateral. In a unilateral contract, the offeror is the only party with a contractual obligation.
Another example of such a contract is:
A reward contract is a common unilateral contract that we see often in daily life.

Suppose that Mr.Kumar has lost his cat. He offers Raju Rs.100 if he finds his cat. This is a unilateral contract because Mr.Kumar is only obligated to pay the Rs100 if, and only if, Raju finds the lost cat. However, Raju is under no obligation to find the lost cat��technically, he has only accepted the offer once he finds the lost cat.

Some states have specific requirements regarding unilateral contracts. For example, in some areas, Mr.Kumar may be legally obligated to keep her offer open if Raju begins making sufficient efforts towards finding the lost cat (maybe he put up posters, maybe he's been asking around at local shelters).

Are Unilateral Contracts Legally Enforceable?
  • Unilateral contracts may seem very one-sided, but they are enforceable in court. The most common issue occurring with unilateral contracts happens when the offeror fails or refuses to keep their promise even when the other party completes the required action.
  • Both unilateral and bilateral contracts can be ��breached,�� or broken. An example of breaching a unilateral contract might be if Mr.Kumar refuses to pay Raju the Rs.100 when he finds his lost cat. In that case, he has broken her promise to pay and can be considered in breach of contract.
  • Whether the contract is unilateral or bilateral, if you have a situation that you think constitutes a breach of contract, you will need to establish certain elements.
  • The Contract Existed: If there was no contract, to begin with, then it can't be broken;
  • The Contract was Broken: If the contract hasn't been broken, there is no cause of action;
  • You Suffered a Loss: If you haven't suffered a loss of some sort, there is nothing for the court to correct; and
  • The Person You're Challenging was Responsible: You need to make sure that you are challenging the right party. Usually, the party making the promise is likely to be responsible.

Bilateral contract:
A bilateral contract is an agreement between two parties in which each side agrees to fulfill his or her side of the bargain.

In more complex situations such as multinational trade negotiations, a bilateral contract can be a so-called "side deal." In which, both parties are involved in the general negotiations but may also see the need for a separate contract relevant only to their shared interests.

Any sales agreement is an example of a bilateral contract. For example, A car buyer may agree to pay the seller a certain amount of money in exchange for the title to the car. The seller agrees to deliver the car title in exchange for the specified sale amount. If either party fails to complete one end of the bargain, a breach of contract has occurred.

A bilateral contract is very common and also enforceable by law.

What is the Difference Between Unilateral and Bilateral Contracts?
The easiest difference to spot between unilateral and bilateral contracts is the number of parties making commitment-one in unilateral contracts, while bilateral contracts need at least two parties making commitments.

The difference between the two types of contracts can be very thin. Let's look at Mr.Kumar and his lost cat once again. Say Mr.Kumar promises Raju Rs.100 if he promises to find his lost cat. If Raju accepts his offer and promises to find Mr.Kumar's cat, this is considered a bilateral contract. Both Mr.Kumar and Raju have made promises to do certain things.

They are now both legally obligated to perform the required actions under this bilateral contract. Even if Raju is not successful in actually finding the cat, Mr.Kumar will be obligated to pay him the Rs.100, especially if Raju made reasonable efforts to find the poor little cat.

Again, the difference is very subtle, but it helps to look at what is being offered in the contract. In a unilateral contract, the offeror is offering to pay for the completed action. However, in a bilateral contract, the offeror is offering to pay for the other party's promise to perform the action. In a unilateral contract, the action must be completed in order to obligate the offeror to pay.

Conclusion of differences are:
  • Parties involved in Unilateral and Bilateral agreements:
    While unilateral contracts involve one person or party, bilateral contracts involve one or more parties.
  • Offers of rewards for Unilateral and Bilateral agreements:
    In a unilateral contract, any offer of a reward is made and effected only be the promisor, who is legally bound to the promise he made. The promisee in this case only accepts the offer. On the other hand, in a bilateral contract, offers and rewards do not apply since both parties are required to make promises.
  • Time-frame:
    In a unilateral contract, the promisor has to specify the duration of the offer. In bilateral contracts, however, both parties have to agree on a timeframe in which the agreed service or product shall be delivered, failure to which can lead to a breach in the contract.

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