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   Unilateral vs Bilateral Contract

Unilateral vs. Bilateral Contracts

Distinguishing between unilateral and bilateral contracts can be tricky sometimes, often because the outcomes appear so similar that the differences seem insignificant. For instance:

Unilateral Contract: Karen wants someone to wash her car. She puts up a flyer saying that anyone who washes her car will receive $20. Bill answers the ad and washes her car. When he's finished, Karen gives him $20.

Bilateral Contract: Karen wants someone to wash her car. She approaches Bill to do the job. Karen and Bill agree that Bill will wash Karen's car, and Karen will give him $20 when it's complete. When Bill is finished washing the car, Karen gives him $20.

So what's the difference? In both cases, Karen offered $20 for a service, and Bill was paid after completing the service.

The trick is to look at who is making a promise in each scenario. In the unilateral contract ("uni" meaning "one"), only one person is promising anything. Karen is offering $20 for a service, but no one has promised to complete that service. Anyone could complete the service and receive the money, but no one has to complete the service. If no one offers to wash her car, the contract remains intact. With a unilateral contract, only one party can breach that contract-in this case, Karen. If Karen refuses to pay the $20 once her car is washed, she is in violation of the promise she made.

In the bilateral contract ("bi" meaning "two,"), two parties are making individual promises. Bill is promising to wash Karen's car; Karen is promising $20 to Bill for washing her car. If Bill fails to wash the car, he is in breach of contract—he has already promised to perform the service. If Bill washes the car but Karen fails to pay him, Karen is now in breach of contract—she promised to pay a certain amount in return for Bill's service. Either or both parties can breach a bilateral contract, which is what distinguishes it from a unilateral contract.

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