To increase demand, you may have offered customers certain rewards or benefits for buying your products or participating in your business’s services. If your business has used this marketing technique, you may have entered into a unilateral contract. This article will outline:

  • how a unilateral contract is made, in contrast to a normal or bilateral contract;
  • examples of this type of contract; and
  • the key considerations you should keep in mind when creating unilateral contracts.

How Do I Make a Unilateral Contract?

A normal or bilateral contract is a legal agreement that creates binding obligations on the parties that enter into it. To be enforceable in law, a contract must have:

  • a clear offer;
  • an unequivocal acceptance of this offer;
  • adequate consideration. Consideration is something of value that backs up the acceptance of the offer; 
  • certain terms; and
  • parties that intend to create legal relations. 

A unilateral contract has these same elements, but they are expressed differently. In this contract, the offer or promise is accepted by a prescribed act’s performance. There is no verbal acceptance. Once the offer has been made, and the prescribed act has been performed, there will be a binding unilateral contract. This contract will confer an obligation or obligations on the person who made the offer (the offeror), not the individual who carried out the prescribed act (the offeree).

Examples of a Unilateral Contract

There is a range of instances where businesses use unilateral contracts. Here are a number of examples:

Example

Description

Retail Store

A retail store specifies in the signs on their storefront that you can get a free item, such as a tote bag, if you spend $50 or more in store. This sign is the offer to enter into a unilateral contract.

A customer spending more than $50 is the prescribed act and the acceptance of this offer. The store and the customer have entered into a contract where the customer is entitled to a free tote bag.

Online Store

An online store has a pop up on their website that outlines that customers can get 20% off their first order if they sign up to the store’s email list. This pop up is the offer to enter into a unilateral contract. A customer signing up to the store’s email list is the prescribed act and the acceptance of this offer.

The online store and the customer have entered into a  contract. Here, the customer is entitled to 20% off their first order; and 

Stamp Cards

A cafe offers stamp cards by their register. These stamp cards state that customers get a free coffee if they buy nine coffees. They are the offer to enter into a unilateral contract. A customer buying nine coffees is the prescribed act and the acceptance of this offer. The cafe and the customer have entered into a contract under which the customer is entitled to a free coffee.

Considerations for Unilateral Contracts

If you do wish to use a marketing technique that involves creating a unilateral contract with your customers, there are certain considerations that you should take into account. 

Clearly Articulate All Terms

As the offeror, you must articulate exactly what your customers have to do to accept your offer. You should also include any other terms and conditions that are applicable under the unilateral contract.

For example, a cafe runs a buy nine, get the tenth coffee free regime. However, in advertising this regime, the cafe all prefaces that:

  • coffees purchased under the scheme must be $4 or more; 
  • the scheme only runs for six months; and
  • customers can only enter into the regime once.

By clearly articulating all terms under the unilateral contract, you also satisfy the certainty of terms required for legally enforceable contracts. 

Revocation

As there is no verbal acceptance of the contract, it may seem unclear when you can revoke the contract. You are entitled to revoke a unilateral contract at any time before the prescribed act occurs. Once the prescribed act has been carried out, the contract has been entered into. To avoid revocation issues, you should clearly articulate when your rewards or benefit scheme ends.

For example, a cafe details that it will only run a buy nine, get the tenth coffee free regime for six months.

Key Takeaways

If your business is wanting to use a rewards or benefit scheme, you may be entering into a unilateral contract with your customers. In a unilateral contract, the offer you make is accepted through a prescribed act’s performance. When you are creating this contract, it is important that you:

  • clearly articulate all of the terms of the contract; and
  • are aware of when you can revoke your offer. 

If you need assistance with drafting a unilateral contract, contact LegalVision’s contract lawyers on 0800 005 570 or complete the form on this page.

Frequently Asked Questions

How do you accept a unilateral contract?

You accept the offer to the contract by performing the offer’s act. 

What is a unilateral contract?

A unilateral contract is a legally binding agreement in which a prescribed act’s performance accepts an offer.  

What is a bilateral contract?

A bilateral contract is a legally binding agreement that creates binding obligations on the parties that enter into it. To be enforceable, this contract must have a clear offer, an unequivocal acceptance of this offer, adequate consideration (consideration is something of value that backs up the acceptance of the offer), certain terms and parties that intend to create legal relations. 

What is an example of a unilateral contract? 

A retail store states that a customer can get a free item in the signs on their storefront, such as a tote bag if they spend $50 or more in store. This sign is the offer to enter into a unilateral contract. Spending more than $50 is the prescribed act and the acceptance of this offer. The store and the customer have entered into a contract under which the customer is entitled to a free tote bag. 

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