Contracts may seem straightforward. Two people enter into discussions and agree on an exchange of promises and shake hands to seal the deal. However, contracts can take more forms than simply the classic handshake deal. A unilateral contract is a good example of this.

How to Establish a Legally Binding Contract

To ensure a contract is legally binding, there are four major elements that must exist:

  1. Agreement – Offer presented by one party that is accepted by the other party;
  2. Consideration – the price or liability paid for the promise;
  3. Intention to Create Legal Relations – Intention for contract to be legally binding;
  4. Certainty – Contract is sufficiently clear and complete.

The fundamental backbone of a contract is an agreement, consisting of an offer by one party and acceptance by the other. What makes unilateral contracts unique is in the way in which agreement is formed.

Unilateral Contracts

When most people think about a contract, they are most likely thinking of a bilateral contract where the two or more parties enter into an agreement of promises. Learn more about Bilateral Contracts to further understand the difference. As the name suggests, a unilateral contract is more one-sided.

A unilateral contract is a legally binding contract in which an offer is accepted by fulfilling or performing the relevant conduct or condition. Unlike bilateral contracts where there is an exchange of mutual promises, only one party in a unilateral contract makes an express promise (the offer) and is obligated to perform the promise.

A common example occurs when “Person A” places an advertisement that states that if someone finds their lost dog and returns it to them, then “Person A” will pay that party $100. Only “Person A” has made an express promise. If “Person B” finds and returns their lost dog, then “Person B” has fulfilled the condition posed by “Person A”, thereby accepting the offer. A unilateral contract is thus formed.

Unilateral Contracts for Small Businesses

Consumers or parties are sometimes hesitant to enter into an obligation with small businesses. However, due to the one-sided nature of the obligation, unilateral contracts have a variety of uses that can be used to assist your business.

Firstly, unilateral contracts can be used to establish loyalty of consumers through a reward system. Take Boost for example. If you get 10 points on your Boost card, Boost promises that your next Boost you ‘purchase’ will be free. This common marketing technique utilises the reward system to incentivise consumers to remain with your business or product thereby assisting in your own business’ growth.

Secondly, unilateral contracts can be utilised to promote awareness for your business. A prime example today is the Killa Burger Challenge. The promise from Killa Burger Grill was that if you eat a Killa Burger (30cm wide), Wicked Chips, Killa Drink (1.25L) and a Killa Soft Serve alone in 60 minutes, you will receive some ‘Killa’ prizes and your name on the ‘Wall of Fame’.

This promotional challenge and campaign is also a unilateral contract, with Killa Burger Grill promising the prizes to those that complete the challenge. The awareness of Killa Burger rose exponentially as a result of this contest and it still remains as one of the most daring food challenges in Australia.

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William Goh

William is a Paralegal, working in our content team, which aims to provide free legal guides to facilitate public access to legal resources. With a passion for commercial and IP law, his research focuses on small businesses, how small businesses can navigate convoluted legal procedures and the protection of intellectual property.