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. Continuous Contract

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

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

    A formal agreement between two parties that may be rendered unenforceable ...
  6. Liquidated Damages

    Present in certain legal contracts, this provision allows for ...
Related Articles
  1. Managing Wealth

    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. ...
  2. Trading

    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.
  3. Investing

    What's The Difference Between Options And Futures?

    An option gives the buyer the right, but not the obligation, to buy or sell a certain asset at a set price during the life of the contract. A futures contract gives the buyer the obligation to ...
  4. Investing

    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.
  5. Investing

    What is a Forward Contract?

    A forward contract is a customized contract between two parties to buy or sell an asset at a specified price on a future date.
  6. Investing

    Party City Holdings: How It's Fared Since Its 2015 IPO (PRTY)

    Learn about Party City Holding's performance as a public company. Investors would have lost much more than the Russell 2000 Index by investing after the IPO.
  7. Small Business

    Master The Art Of Negotiation

    Learn the strategies that will help you to come out on top in any negotiation.
  8. Financial Advisor

    Divorce and Annuities: What Clients Need to Know

    Divorce can be the most financially devastating event in a person’s life. Here’s what your clients need to know about handling annuities in a divorce case.
  9. Trading

    Futures, Derivatives and Liquidity: More or Less Risky?

    Futures and derivatives get a bad rap after the 2008 financial crisis, but these instruments are meant to mitigate market risk.
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 >>
Trading Center