Unilateral vs bilateral contracts

There are two primary categories of contracts in business — bilateral contracts and unilateral contracts. The two have important features in common. Both contain terms and conditions that, if breached, can result in legal disputes. The party that sues must prove the contract is valid and that they suffered damages because of the breach.

A bilateral contract is a legally binding agreement, typically in writing, with terms and conditions negotiated between two or more parties.  It requires both parties to perform. By contrast, a unilateral contract consists of an offer that may or may not be accepted, and only comes into force if the second party accepts the offer by taking some action.

Let’s examine some practical examples to help us understand these concepts.

Examples of unilateral contracts in business

Once you understand the concept you’ll notice many examples of unilateral contracts. Coupons are a very common example of unilateral contracts. No one is obligated to purchase the item, or even use the coupon if they do, but everyone who makes the purchase with the coupon gets the discount. 

A flyer offering a reward for finding lost pet is a classic example of a unilateral contract. The person who staples a flyer to a telephone pole offering a $100 reward to whoever returns their lost dog is legally bound to pay. However, no one is bound by the terms of the reward to search for the dog. In other words, the person who wants their dog back cannot sue anyone for failing to search for the dog, but whoever returns the dog could sue the pet owner if they refused to pay the reward.

Similarly, when Main Street Pizza advertises half-price large pizzas between noon and 2 p.m., with a two-pizza limit, they’re obligated to sell large pizzas for half price to every customer who wants one (or two), but no one is obligated to buy the pizza. 

In business, it’s important to understand the concept of a unilateral contract so you don’t make legally binding promises without realizing it.

How a bilateral contract is different

A bilateral contract is negotiated between two or more parties. This is what most people think of when they hear the term “contract.”

A bilateral contract is based on an offer by the promisor, acceptance by the promisee, and consideration, which is typically money but could be a barter, paid in exchange for goods or services.

Business-to-business contracts are almost always bilateral. For example, if you hire an accountant to do your taxes, you agree upon a rate in exchange for your finished tax returns. The accountant is required to provide the services, which is the thing of value they bring to the agreement. In exchange for them preparing your tax returns, you are obligated to pay.You each agree to defined obligations in exchange for something you value. 

Other examples of bilateral contracts include employment contracts, professional service and sales agreements, warrantees, leases, mortgages, and many more.

Both unilateral and bilateral contracts can be enforced in court. If Main Street Pizza charges you full price for a large pizza at 12:30 p.m. despite you presenting a valid discount coupon, they have breached the unilateral contract. Similarly, if your accountant deposits your retainer fee but never delivers your tax returns, he or she has breached the bilateral contract. A breach of either kind of contract can be taken to court.

A quick, frictionless way to get bilateral contracts signed 

You don’t have to be a lawyer to succeed in business, but it helps to know the basics of contracts to avoid legal issues. (Check out our complete guide on how to write a contract here.) Contracts can be complex to negotiate, but their goal, in essence, is to be fair to all parties. If you’re careful about what you’re promising and what you’re being promised, you’re off to a good start managing contracts of every sort.

Just remember that no matter how carefully crafted, a contract isn’t legally binding unless both parties have signed it. To get signatures quickly and easily, try Jotform Sign.

Jotform Sign is an easy-to-use e-signature solution made for businesses of all sizes. It allows you to gather signatures remotely, avoiding the scheduling conflicts and delays associated with traditional paperwork. Simply send your document to signers via email or a link, and collect the necessary signatures with a few clicks. Get notified about completed signatures automatically.

Speaking of automation, Jotform Sign also lets you automate your e-signature process by setting up an approval workflow that moves your contracts and other documents along as designated parties complete their assigned tasks.

Create a contract from scratch, get a headstart with one of 600-plus document templates, or upload an existing PDF and turn it into an e-sign document you can send to another party. You can reuse Jotform Sign templates as needed, so you can stay consistent with your contract terms and save time.

Try one of these contract templates:

• Consulting agreement template. Hanging your shingle as a consultant? Whether you work in marketing, accounting, or IT, you’ll need a contract that lays out the services you’ll offer the client and how much you’ll be charging them. This template includes these elements, along with boilerplate verbiage and signature fields.
• Nondisclosure agreement template. Considering hiring an independent contractor for your business or seeking advice for a new product you’re bringing to market? Whatever the scenario, you’ll need to protect your intellectual property with a nondisclosure agreement. This template includes standard fields for identifying the parties of the contract, boilerplate legal language, and signature fields.
• Month-to-month rental agreement template. Whether you’re a new landlord or work in property management, this rental agreement template will help you make a month-to-month tenant arrangement legally binding. It includes general language about use and occupancy, rent, subleasing, and other relevant rental aspects.

You can customize each of these templates in Jotform’s simple, drag-and-drop interface. Add more fields for signatures and other information, update the verbiage, tailor the look to match your own branding, and more. Build a document once and send it as many times as needed.

Build your documents, collect signatures, and even automate your document processes all in one place with Jotform Sign. Get started with a contract template today.

AS ALWAYS, CONSULT AN ATTORNEY BEFORE RELYING ON ANY FORM CONTRACT OR CONTRACT TEMPLATE. THE CONTENT ABOVE IS FOR INFORMATIONAL PURPOSES ONLY.