Contracts come in many shapes and sizes. For example, they can be:

  • simple or complex;
  • one page or 500 pages;
  • written or verbal; and
  • unilateral or bilateral.

The last of these distinctions broadly distinguishes contracts based on how many people are involved in the making of the promises. Unilateral contracts are a powerful tool that can help drive your business’ growth. However, you need to ensure that you are meeting your legal obligations under a unilateral contract. This article will explain what a unilateral contract is and how you can utilise one in the right way to expand your business.

Bilateral vs Unilateral Contracts

Bilateral Contracts

When you think of a contract, you most likely think of a bilateral contract. A bilateral contract involves an exchange of promises between the two parties to the agreement.

Examples of bilateral contracts include where you promise to:

  • pay someone $1,000 a week in rent, and they promise to let you live in your property without their interference;
  • give someone a working car for a day, and they promise to pay you $79 and return the car with a full tank of gas; or
  • deliver someone 100 new office chairs next week for their rapidly expanding start-up, and they promise to pay you $200 in delivery fees.

In each of these cases, both parties are legally bound to perform their promises and open themselves up to legal consequences if they do not carry them out. 

Unilateral Contracts

In contrast, in a unilateral contract, only one party makes a promise. This promise will be accompanied by some sort of condition that, if fulfilled, will bind them to the contract.

For example, the classic offer of “Wanted: dead or alive for $1,000” in an old-time western movie is a unilateral contract. If someone returns the fugitive to the sheriff, the contract becomes binding, and the sheriff must then pay the reward.

How Can Unilateral Contracts Grow My Business?

Unilateral contracts can be a fantastic tool to assist your business’ growth. You can use them to:

  • increase revenue per customer through providing benefits for larger spends. For example, schemes to “spend more than $100 and get free shipping” are offered by many online stores;
  • increase repeat business through loyalty programs. For example, “buy 10, and the 11th is free”;
  • promote your business through giveaways to potential clients. For example, “sign up and get a free sample”; and
  • increase your customer base through referral schemes. For example, UberEats has a scheme that allows existing customers to give their friends a code for $15 off their first order.

Important Legal Considerations

When using unilateral contracts to increase your customer base and ultimately grow your business, it is important to consider the legally binding nature of the transaction. In other words, you must always be prepared to deliver on the promise. Therefore, you should ensure that what you are promising is proportionate to your forecasted growth and that you are capable of performing it. For instance, using some of the examples above, you may need to consider whether:

  • your online shop will be able to offer free shipping for orders over $100 if shipping your stock is costly and difficult;
  • you have enough free samples in stock to meet the projected uptake of a sign-up scheme. If not, you may wish to consider putting a time frame or other restrictions on the terms of the offer to avoid over-committing; and
  • your business generally attracts one-off customers with a low average spend. If so, a referral scheme may not be appropriate unless you set a minimum cost for the first order that ensures you don’t eat into your profits.

Key Takeaways

Unilateral contracts can be a great way to grow your business. By offering attractive incentives to the public, you may gain loyal customers.

However, just as with any bilateral contract, careful thought needs to be put into the terms of a unilateral contract. You must ensure that you will be able to deliver on your promises and that the deal is projected to grow your business in the future. To understand more about how unilateral contracts could be used in your business, contact LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page.

Taylor Gray
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