What defines a unilateral contract?

A unilateral contract is characterized by the fact that only one party is legally bound to fulfill their obligation, while the other party has no corresponding legal obligation to perform. In this type of contract, one party makes a promise in exchange for the performance of an act by the other party. For instance, a reward contract is a classic example: if someone offers a reward for the return of a lost pet, only the person making the offer (the offeror) has a binding obligation to pay the reward once the pet is returned, while the finder of the pet is not obligated to search for it.

The defining feature of a unilateral contract is its one-sided nature, where the legal responsibility is only on one party until the other party acts. This distinguishes unilateral contracts from bilateral contracts, where both parties have explicit obligations. Understanding the nature of unilateral contracts is essential in the context of insurance and legal agreements, as it significantly impacts how parties understand their rights and responsibilities.