What is a Bilateral Contract? [Legal World Simplified]

Contracts are agreements that two or more parties agreed to sign. Contracts are generally of two kinds. They are Unilateral and bilateral contracts. And in this blog, I will be talking about what is a bilateral contract. 

You will also learn about the difference between unilateral and bilateral contracts, and which contract lawyer should you go to!

Additionally, I will explain when you would need this contract and how you will benefit from the same.

So, if that is what you are looking for, I have you covered! In this series of getting the legal terms simplified, you will come closer to understanding yet another term related to contracts.

Therefore, keep on reading this blog till the end and thank me later…

What is a Bilateral Contract?

A bilateral contract is one in which the two parties exchange assurance to perform. One party’s capacity to assure serves as a reference for the assurance of the other party. 

Due to this, each party of a bilateral contract acts as an obligator on the party’s assurance and an obligee to the other party’s request.

Generally, bilateral contracts have an equal obligation or consideration. Generally, the offerer is the one who develops this consideration or obligation, It then passes on to the offeree. 

Bilateral contracts are popular as one of the most common binding contracts. Each party to this contract is considered the ‘obiligor’ and ‘obligee.’ The other’s contract binds both parties.  

The term obligor in a bilateral contract states a person bound to another. Moreover, obligee is the individual who is obligated or bound to another.

Like any other contracts, parties sign bilateral contracts to make them legally binding and enforceable.

Examples of Bilateral Contracts

Sales agreements are the most recognizable forms of unilateral contracts. 

A consumer of a car might agree to pay the salesperson a certain amount of capital in exchange for the title to retain the car. 

Additionally, the seller agrees to deliver the car in exchange for a specific sales capital.  

If either party fails to fulfill the bargain set forward, the occurrence of a breach of contract will be presented. 

In this aspect, you can understand that most agreements we enter are bilateral contracts. Sometimes, they are signed agreements, and some are orally agreements that the parties decide to follow.

Business contracts are also mainly considered bilateral contracts, as companies are known to provide a product or service in exchange for financial compensation. 

Due to this, business contracts are generally popular for their ability to enter into bilateral contracts with suppliers or customers. 

Employee agreement is another example of a bilateral contract. This is because the employer agrees to pay the employee a certain compensation to assure that the employee satisfies the designated task furnished by the employer.

What is a Unilateral Contracts?

A unilateral contract is a one-sided contract. This is when the offeror assures to pay an amount only after the completion of a task by the offeree. 

In unilateral agreements, we can notice the offeree for their capacity to have a contractual obligation. 

A unilateral contract does not require the offeree to perform the requested task or act.

This kind of contract came into being to make optional offers. 

There are two major types of unilateral contracts. They are as follows:

• Open requests
• Insurance 

Bilateral vs. Unilateral Contracts: An In-Depth Comparison

You need to keep several things in mind when choosing a unilateral or a bilateral contract. But to do that, you must know how they are similar or different.

That is what I am going to help you out with. Let us dig deeper into the comparison of the two forms of contract:

Area of Comparison	Bilateral Contracts	Unilateral Contracts
Definition and Obligations	Popular as reciprocal obligations, where both parties are legally bound to fulfill their individual tasks.	One party is obligated to fulfill their obligation only when the other party has fulfilled theirs.
Legal Binding	Both parties are legally bound to complete their tasks, with the risk of breach of contract if they fail to comply.	The second party is not legally bound to complete the task, with no risk of breach of contract.
Payment and Compensation	Both parties receive compensation for completing their tasks.	The first party issues payment upon completion of the second party’s obligation.
Examples	Employer-employee contract for auditing finances in exchange for monthly salary.	Party requests another party to perform a song for $100, with no obligation to fulfill the request.

When Would You Need a Bilateral Contract?

When both parties to a transaction or agreement wish to be oblige legally to keep their end of the bargain, they would require a bilateral contract. In other words, both sides promise something in return for something else. 

Some examples of when you might need a bilateral contract are as follows:

• Employer-employee relationships: An employment contract is a two-way agreement in which the employee agrees to work and fulfill performance standards, and the company agrees to pay a salary and give benefits.
• Business partnerships: When two companies decide to collaborate on a project, they may sign a bilateral contract in which they each commit to providing resources and knowledge.
• Real estate transactions: Parties use a bilateral contract when purchasing or selling real estate to ensure both parties carry out their responsibilities, such as the buyer paying the purchase price and the seller delivering the property.

Both parties have duties and responsibilities in each of these situations, and a bilateral contract helps ensure that everyone keeps their end of the bargain.

Final Thought

Bilateral contracts are the most common kinds of agreements that we enter. This is because sales agreements are the most recognizable kinds of contracts that we tend to enter daily.  

You must effectively understand the clause of a bilateral contract to restrict the occurrence of a breach of contract. 

As bilateral contracts are legally binding, it is vital to effectively comply with the terms. 

So, seeking guidance from an experienced contract attorney will allow you to understand the clauses of a bilateral contract to restrict the occurrence of a breach of contract.

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