Future Business Leaders of America (FBLA) Business Law Practice Exam

What characterizes a unilateral contract?

1. A contract where both parties promise to perform

2. A contract that contains a promise by only one person

3. A contract that is unenforceable in court

4. A contract that requires a negotiation process

The correct answer is: A contract that contains a promise by only one person

A unilateral contract is characterized by the presence of a promise made by only one party, which is contingent upon the performance of an act by another party. In simpler terms, one party commits to providing a benefit, such as a reward, as long as the other party fulfills a specific condition or performs a particular action. For example, if someone offers a reward for the return of a lost pet, the person offering the reward is making a unilateral promise—only they are promising something, while the other party can accept the offer by simply fulfilling the condition of returning the pet. In contrast, a contract where both parties promise to perform would constitute a bilateral contract, as both sides are obligated to fulfill their respective promises. An unenforceable contract does not have a valid legal standing and therefore cannot be upheld in court, which is not an inherent quality of unilateral contracts. Finally, while negotiations can sometimes occur before a contract is finalized, they are not a defining characteristic of unilateral contracts, which can be formed simply through the unilateral promise and acceptance through performance, without prior negotiations.