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

What type of contract involves one party making a promise in exchange for performance?

1. Bilateral Contract

2. Unilateral Contract

3. Express Contract

4. Oral Contract

The correct answer is: Unilateral Contract

A unilateral contract is one in which one party makes a promise that is contingent upon the performance of an act by the second party. This means that the offeror (the party making the promise) is making a commitment that will only be fulfilled once the offeree (the party receiving the promise) carries out the specific action. Essentially, the performance of the act is what creates the binding nature of the contract. In contrast, a bilateral contract involves mutual promises, where both parties commit to fulfilling their respective obligations. An express contract is one that is clearly stated in words, whether spoken or written, and does not specifically denote whether it is unilateral or bilateral. Furthermore, an oral contract is simply a contract that is verbally agreed upon and can include various forms of agreements but does not specifically describe the nature of the promise or performance involved. Understanding the distinction, a unilateral contract is distinctly characterized by the exchange of performance for a promise, as opposed to an exchange of promises found in bilateral contracts.