Unilateral vs Bilateral Contracts

Often times, people are overwhelmed with real estate terms such as “contracts”. But in reality, you are already very familiar with contracts and how they are used in every day life and in business.  As the title of this article suggests, there are two types of contracts, bilateral and unilateral. The difference between the two is how many people are involved in the contract. Let’s break down the words here…

Uni (one)
Bi (two)

Remember the above and you’ll ace any question on your real estate exam

What is a Bilateral Contract?

Definition: A bilateral contract is an agreement between two (or more) people. Most of your typical contracts fall into this category.

Example: Did you buy gas or groceries this week? Congrats! You are vastly experienced in Bilateral contracts. it’s an agreement between two or more people.

Just think of this, “If I do this, the other person will do that” It’s the type of contract you take part in almost every day of your life.

What is a Unilateral Contract?

Definition: Only one person is making a promise to do something.

Example: A $500 reward for a lost dog.

As pet owners, almost all of us have had a situation in our life where we have lost a dog or a cat. You frantically make a flyer and start posting the flyer all over town. It says, “$500 reward for my lost dog “Hunter” Now as sad as this situation is, it’s a perfect example of a unilateral contract. Only one person is promising to do something.

What’s the Difference Between A Unilateral and a Bilateral Contract?

As we just went over, the only difference between these types of contracts is the number of people making promises to do something. In a bilateral contact, you have two people making promises while in a unilateral contract, there is only one person.

How are Bilateral and Unilateral Contracts Similar?

How these contracts are enforced are the same same. A judge would enforce both a unilateral contract and a bilateral contact the exact same.

Both can be breached and both are enforceable in a court of law.

Do you know what a breach of contract is? In our examples above, imagine you pay Starbucks for that cup of coffee and then they decide not to give you the coffee? That is breach of contract. Often times there are significant penalties for breaching contracts and other times parties look the other way to avoid the legal hassle.

Breach of contracts are pretty self-explanatory in bilateral contracts. For an example of a breached bilateral contract, just imagine this – Let’s say you own a company and hire a bunch of employees. Most of them are great except for one pesky one. This one employee you catch sleeping on the job, which is explicitly forbidden on his contract! This would be an example of a bilateral contract being breached.

For a great example of a breached unilateral contract, let’s use our example from way earlier. Let’s say you post online offering a $250 reward to the person who returns your cat, Coco. Let’s say someone finds Coco, but you only are willing to give the finder $100. This is a breach of contract because you made a promise of a $250 reward.


What do I need to know about Bilateral Contracts and Unilateral Contract For My Real Estate Exam?

Honestly, at this point you should have a perfect understanding of the difference between a bilateral contract and a unilateral contract. If you only take away one thing from this article, just know that the only real difference between the two are how many parties are involved. From our data, you can expect to see 2 or 3 questions on your real estate exam regarding this topic.

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