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

Which type of contract allows one party to be bound by a promise without the other party's commitment?

1. Mutual contract

2. Bilateral contract

3. Unilateral contract

4. Implied contract

The correct answer is: Unilateral contract

A unilateral contract is characterized by a promise made by one party that binds them to complete an obligation if the other party performs a specific act. In this type of contract, only one party is making a legally enforceable promise, while the other party is not required to take any action or make any promise in return. This is commonly seen in scenarios such as a reward contract, where one party offers a reward for the return of lost property; the offeror is obligated to pay the reward upon the completion of the act (the return of the property) by anyone, but the act of returning is not a promise made by the other party. In contrast, a mutual contract involves promises from both parties, thus both are committed to fulfilling their obligations. Bilateral contracts require mutual promises to be made by both parties, meaning that both sides are obligated to act, and an implied contract is formed through the actions of the parties rather than explicit promises. In these cases, both parties are committed to each other, which distinguishes them from the nature of a unilateral contract.