Unilateral contract
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A unilateral contract is a type of contract where one party, the promisor, makes an offer to the other party, the promisee, to pay them or provide a reward if the promisee performs a specific act. In a unilateral contract, only the promisor is legally obligated under the contract terms once the promisee performs the act. An insurance contract is an example of a unilateral contract because the insurer promises to reimburse losses if they occur after the insured pays the premium, with only the insurer then being obligated.
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Unilateral contract
- 1. By. Deepika. S Neetu.P.S Sanjana.S
- 2. Definition of 'Unilateral Contract 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. For example, if an individual places an advertisement in the 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.
- 3. Meaning Contract arising where one party (the promisor) makes an offer to pay another party (the promisee) in return for the performance of an act, and the promisee gives his or her assent by performing the said act. A reward offered for providing certain information is an example of a unilateral contract. Type of contract in which only one of the contracting parties is under an enforceable obligation
- 4. Why is an insurance contract a unilateral contract? In Unilateral contract, the promise of one party is exchanged for a specific act of the other party. In insurance contract, the insured performs the act of paying the policy premium and the insurer promises to reimburse the insured for any covered losses that may occur.
- 5. It must be noted that once the insured has paid the policy premium nothing else is required on his/her part. Only insurer has covenanted any further action and only the insurer can be held liable for Breach of Contract.