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Bilateral Versus Unilateral Contracts

A bilateral contract is one where both parties are to perform their promises or obligations at some future time but not necessarily at the same time. A unilateral contract is one where one of the parties performs his promises at the time of making the contract and the other party promises to perform in the future. For example, if Vincent promise to sell Joe a Car for $1000 and Joe promises to pay $1000 for the car, the contract is bilateral and executory on both sides. However if Joe promises to pay $1000 when Vincent delivers the car to him and Vincent does so, then the contract is unilateral, executed as to Vincent but executory as to Joe. In other words, it simply means a bilateral contract is enforceable only when Joe offers to buy the car from Vincent, and Vincent agrees. And a unilateral contract becomes enforceable when that Joe promises to pay $1000 for the car if Vincent agrees to deliver the car to him.

There are two kinds of contract. The usual variety is called bilateral in which both parties promise to do something for the other, and are bound together from a precise moment in time. This is sometimes referred to as “mutuality of undertaking”. The less common species are unilateral contract, in which only one party promises. The other makes no promises but performs an act in return for the other party’s promise. The bilateral situation is the more normal one and is a mutual contractual obligation from the outset. The contract is formed before anything is done, though often only seconds before the performance begins. The unilateral contract, on the other hand, is formed only after the completion of the act. Performance by one party and his acceptance coincide. In both bilateral and unilateral contracts, there is offer and acceptance, but the analysis differs which I will show you.

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Firstly, I will discuss bilateral contact. An example of this type of contract is Thornton v. Shoe Lane Parking in which a professional musician, Francis Thornton, had a job for a day playing his trumpet for the BBC at Farringdon Hall in central London. The plaintiff decided to leave his car nearby in a recently opened multi-storey car park in Shoe Lane close to Fleet Street. He drove up, pressed a button and received a ticket, at which point the barrier rose up and he and his car entered the car park. A lift took his car to an upper floor. Three hours later the plaintiff returned from his appointment. The car was brought down again on the lift to the place where Thornton was waiting, but as he was loading some items into the boot of his car, an accident occurred. Part of the blame for the accident lay with himself and part with the car park as a result of negligence by one of the attendants. Mr Thornton sued Shoe Lane Parking Ltd for his own personal injuries and damage to his car. The Court of Appeal eventually awarded him $3,637 for his injuries (he had been 50% contributorily negligent), but nothing for the car. It was held that a contract had been formed as soon as he passed the ticket barrier, there being offer and acceptance and, therefore agreement. The contract formed was bilateral in that the plaintiff had promised to pay in return for the defendants looking after his car. Because this was a bilateral contract, both parties were bound contemporaneously.

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The central issue in Thornton v. Shoe Lane Parking was whether certain attempts by Shoe Lane Parking to exclude liability for personal injuries and damage to the car had been incorporated into the contract. Altogether, there were three attempts to do so by the defendants: (1) the sign outside the car park as the driver approached the car park, : (2) the ticket that came out from the machine and : (3) a notice in the car park itself excluding damage to the car. The rule is that only terms brought to the contracting parties’ attention at the time of, or before the contract is formed can be incorporated into the contract. Anything said or written after the agreement is made, for example, after the acceptance of the offer, is too late. Offer and acceptance determined the precise moment at which the parties were contractually bound. On this basis the Court of Appeal held, the contract having been formed at the barrier, that the notice outside was included, but the ticket and sign were not.

The concept of a unilateral contract is illustrated by reference to a classic contract law case, Carlile v. Carbolic Smoke Ball Co Ltd. The defendant, Frederick Roe, the proprietor of a medical preparation called “The Carbolic Smoke Ball’ , placed an advertisement in “ The Pall Mall Gazette” Promising to pay $100 to anyone who used the Carbolic Smoke Ball for two weeks and who, for a limited period thereafter, contracted influenza. Mrs Louise Carlil did both and sued to recover her $100, as promised. In the High Court, the defences of the Smoke Ball Company, indeed most of the arguments, appear to have been about the facts rather than the law. In commercial contract practice and litigation, or arbitration over disputes, the facts are indeed often more complicated and relevant to the final outcome than the law in question.

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In Carlil some of the factual arguments were that the advertisement was not accurately reported. The plaintiff had not relied on it in any case, had not used it properly, had never actually caught influenza and, if she did, never reported it to the defendant. The court found for the plaintiff. In the Court of Appeal, the Carbolic Smoke Ball Co as appellants raised a number of legal points relevant to contract law: (1) the advertisement was not an offer, but an invitation to treat. In other words, there was no intention of making an offer; (2) the advertisement was too vague to be an offer; (3) an offer could not be made to the whole world; (4) there was no consideration for the promise (whether the plaintiff herself had actually bought the smoke ball) ; (5) where was the acceptance of the offer? In a bilateral contract the acceptance is normally communicated., and that was not done here; (6) the advertisement was a bet or wagering contract, in which case it would be void as contrary to public policy.

The Court of Appeal rejected most of these arguments and held that there was a contract. The advertisement was held to be a promise which was an offer to the whole world and was capable of amounting to an offer of a unilateral contract. Communication of acceptance is not necessary in the case of a unilateral contract. Consideration and acceptance could be found in Mrs Carlil taking and using the Smoke Ball for the full two weeks. It was only at the end of this time that the promise became legally binding. The Smoke Ball Company’s offer could be revoked at any time until she had completed the performance. The Court of Appeal also dealt with the consideration point.

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Catching influenza was not the consideration but a “condition” (sometimes called an “if” clause). (I will pay you if a certain event happens, which you do not promise to bring about or which is outside of your control.). Consideration was found in Mrs Carlil using the Smoke Ball. The Court of Appeal also found that there was an intention by the parties to treat the arrangements as contractual. The deposit of money was an important indicator of contractual intention. Carlile was the first case to explicitly state a requirement of intention to create legal relations.

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Bilateral Versus Unilateral Contracts. (2021, Mar 10). Retrieved November 30, 2021, from https://essayscollector.com/essays/bilateral-versus-unilateral-contracts/