Unilateral Contract

What is a 'Unilateral Contract'

A unilateral contract is a legally enforceable promise - between legally competent parties - to do or refrain from doing a specified, legal act or acts. In a unilateral contract, one party pays the other party to perform a certain duty. If the duty is fulfilled, the party on the other side of the contract is obligated to transfer the specified funds. Only this party is under obligation of the contract, whereas the acting party is not legally obliged to perform the duty.

BREAKING DOWN 'Unilateral Contract'

Unilateral contracts are a contract type where one party is legally obligated to uphold the terms of the contract. For example, if an individual places an advertisement in the local newspaper to provide an award in the event a missing item is returned, that individual is obligated to pay the award if the item is indeed returned.

RELATED TERMS
  1. Bilateral Contract

    A bilateral contract is a reciprocal arrangement between two ...
  2. Third Party Beneficiary

    A person who will benefit from a contract made between two other ...
  3. Performance Bond

    A bond issued to one party of a contract as a guarantee against ...
  4. Continuous Contract

    A reinsurance contract that does not have a fixed contract end ...
  5. Obligation

    The responsibility to meet the terms of a contract. If an obligation ...
  6. Voidable Contract

    A formal agreement between two parties that may be rendered unenforceable ...
Related Articles
  1. Professionals

    Business Law: Contracts

    Business Law: Contracts
  2. Professionals

    Contract Requirements

    Contract Requirements
  3. Professionals

    Contract Characteristics

    Contract Characteristics
  4. Investing

    How Do Futures Contracts Work?

    Futures contracts are one of the most important financial innovations in history, but they are often misunderstood. Find out this contract is used to transfer risk between different parties. ...
  5. Term

    The Difference Between Forwards and Futures

    Both forward and futures contracts allow investors to buy or sell an asset at a specific time and price.
  6. Professionals

    Agency

    Agency
  7. Options & Futures

    Options on Futures

    Options on futures contracts offer another way for day traders to use options. These are traded on the same exchange as the underlying futures contract. Traders should take care to understand ...
  8. Investing Basics

    What are the fiduciary responsibilities of board members?

    Find out what fiduciary duties a board of directors owes to the company and its shareholders, including the duties of care, good faith and loyalty.
  9. Professionals

    Terminating a Forward Contract Prior to Expiration

    CFA Level 1 - Terminating a Forward Contract Prior to Expiration. Learn how to terminate your position in a forward contract through use of an offset. Discusses default risk upon terminating ...
  10. Professionals

    Forward Markets and Contracts: Settlement Procedures

    CFA Level 1 - Forward Markets and Contracts: Settlement Procedures. Learn the differences between being long or short in a forward contract. Also contrasts how physical and cash deliveries are ...
RELATED FAQS
  1. How can a futures trader exit a position prior to expiration?

    A futures contract is an agreement to buy or sell a commodity at a pre-determined price and quantity at a future date in ... Read Answer >>
  2. Why is fiduciary duty so important?

    Find out why fiduciary duty is so important, including what this legal obligation entails and an example of how it can affect ... Read Answer >>
  3. What is the difference between forward and futures contracts?

    Fundamentally, forward and futures contracts have the same function: both types of contracts allow people to buy or sell ... Read Answer >>
  4. What is a forward contract against an export?

    Understand forward exchange contracts in exporting, and learn the purpose of using a forward contract and its advantages ... Read Answer >>
  5. What are some types of financial netting?

    Read about the different types of financial netting, which is a critical concept when competing claims exist between different ... Read Answer >>
  6. What does a futures contract cost?

    Learn about values of futures contracts and the initial margin a trader must place in an account to open a futures position, ... Read Answer >>
Hot Definitions
  1. Return On Invested Capital - ROIC

    A calculation used to assess a company's efficiency at allocating the capital under its control to profitable investments. ...
  2. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  3. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  4. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  5. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  6. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
Trading Center