Bilateral Contract – A Beginners Guide Of 2023


Contracts are recognized as agreements that are agreed between two or more parties. Contracts are generally known to be of two kinds: unilateral and bilateral. 

The following article will state the definition of bilateral contracts. You will also learn about the difference between unilateral and bilateral contracts in this article. 

Bilateral Contract: Definition

Bilateral Contract Definition

A bilateral contract is a contract in which the two parties exchanges 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 own assurance and an obligee to the other party’s request. Generally, bilateral contracts are recognized to have an equal obligation or consideration. This consideration or obligation is developed by the offerer and passed toward the offeree. 

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

The term obligor in a bilateral contract states a person who is bound to another. Moreover, the term obligee is defined as an individual who is obligated or bound to another. Bilateral contracts, like any other contracts, are signed to make them legally binding and enforceable.

Bilatarel Contract: Example

Bilatarel Contract Example 

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 that we enter are bilateral contracts. In some cases, they are signed agreements, and some are orally agreed upon. 

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

Due to this, business contracts are generally known 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 for the assurance that the employee satisfies the designated task furnished by the employer. 

What Is Meant By Unilateral Contracts?

What Is Meant By Unilateral Contracts

A unilateral contract is defined as 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, the offeree is only noticed 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 is developed for the purpose of making optional offers. 

Types Of Unilateral Contracts

Bilateral vs. Unilateral Contracts

Bilateral contracts are recognized as reciprocal obligations, which makes this kind of contract to be different from unilateral contracts. 

Within a unilateral contract, one party is obligated to fulfil its obligation only when the other party has fulfilled its obligation. 

Unilateral contracts usually involve the first party issuing a payment upon the completion of the second party’s ability to complete their obligation. 

Legally, within unilateral contracts, the second party is not bound for the completion of the task. Due to this, they do not have the risk of facing a violation of contract upon incompletion of the task stated by the first party. 

On the other hand, within bilateral contracts, both parties to the agreement are obligated to complete their individual tasks. 

Both parties are subjected to fulfill their stated duties in order to avoid the occurrence of a breach of contract. 

This means parties in a bilateral contract are legally bound with the capacity to effectively comply with the terms of the contract. 

For instance, a party requests another party to perform a song for the exchange of $100. The second party is not obligated to fulfill the request of the first party in such a unilateral contract. 

However, if the second party agrees to perform a song, the first party will be obligated to pay him or her $100. 

On the other hand, an employer provides a task to its employees to complete auditing their finances by the end of a month. In return, the employer will be paying compensation for conducting the task. 

This is a bilateral contract where both parties are obliged to perform their duties in order to receive their compensation. 

The employer needs their finances to be audited by the end of a financial year. The employee needs their monthly salary to maintain a standard of living. 

Due to this, either of the parties not complying to fulfill their duties will be faced with the charge of breach of contract. 

So, before entering into a bilateral contract, it is advisable for you to thoroughly go through the terms and conditions that are stated in the contract. 

You can also obtain services from an experienced contract lawyer to understand the clause before entering it.

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 on a daily basis.  

It is necessary for you to effectively understand the clause of a bilateral contract for the purpose of restricting 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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