Contract Law: Differences Between Unilateral and Bilateral Contracts

This report provides a comprehensive overview of contract law, focusing on the distinctions between unilateral and bilateral contracts. It begins by defining both types of contracts, explaining how bilateral contracts involve mutual promises between two or more parties, while unilateral contracts involve a promise from one party in exchange for an action by another. The report then delves into the practical implications of these differences, using case studies such as Partridge v. Crittenden, Carlil v. Carbolic Smoke Ball, and Harvey v. Facey to illustrate key concepts like offers, invitations to treat, and acceptance. It further explores the legal aspects of contract formation, including the requirements for a valid offer and acceptance, and the enforceability of contracts under the Contracts Act 1950 Malaysia. The report highlights how advertisements can function as offers or invitations to treat, and how the courts typically favor bilateral contracts. The report also emphasizes the importance of understanding these contract types for businesses, particularly in retail and reward scenarios, and concludes by summarizing the conditions for forming and enforcing each type of contract.

Running head: CONTRACT LAW
Contract Law
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The differences between unilateral contract and bilateral contract
Generally, contracts are considered a part of taking care and maintaining the business.
The contracts that are included consist of unilateral and bilateral. These two kinds deal with
something where plenty of individuals deal with it on a regular basis even in certain
situations where people does not have the knowledge of it. Firstly, a bilateral contract is
regarded as the most simple and easy form of contract. It refers to a situation where an
agreement is created between two individuals or more. Majority of the contracts are belong to
the category of bilateral contracts. For instance, while purchasing any product, the element of
promise is involved and the action to another party is response to that person will be treated
to be a unilateral contract. On the other hand, unilateral contacts refer to those contracts
where a single individual or a group alone undertakes the actions involved. In relation to the
contracts, unilateral contracts usually allow only a single individual to make an agreement.
Insurance contracts are treated to be as examples of unilateral contracts. An unilateral
contract can be enforced if any agreement forms a legal obligation that is an enforceable
contract. The individuals must be competent enough regarding their duties and
responsibilities.
Pursuant to the Contracts Act 1950 Malaysia, an offer is generally treated to be a
proposal where it is essential for the information of an agreement. As per Section 2(a) of the
said Act, when a person is making the proposal is referred to as the promisor while the person
accepting the proposal is known as the promissee. Thereafter, as per Section 2(c) of the
mentioned Act and that the individual who is not enforceable is void. Advertisements
therefore include of both unilateral and bilateral contracts. Advertisements of bilateral
contracts are not generally considered offers since he may wish for that before becoming
legally bound for assuring him that the opponent party should be capable in carrying out his
part of the contract. Such a scenario has been observed in the case of Partridge v. Crittenden

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[1968] 1 W.L.R. 12041. When the nature of sale of goods has bilateral nature it will not be
treated as an offer but an invitation to treat. The advertisements mentioned in the newspapers
stated that the advertiser had goods for sale that generally has invitation to treat and not offer.
This scenario has been illustrated in the case of Eckhardt Marine GMBH v. Sheriff, High
Court of Malay. From this situation and as mentioned before, the advertisements made in the
newspapers and magazines are referred to as mere invitations to treat instead of an offer that
led to the case of Ah Chong2. Therefore, the advertisement that was made by Ah Chong was
not an offer but an invitation to treat. In the case of Grainger & Sons v. Gough [1896] A.C.
325 the Court held that the rule and stated that the purchaser is the offeror who had suggested
the offer for purchasing. The other person who had advertised was known as the offeree
having the choice of rejecting or accepting the offer. In the case of Hyde v. Wrench [1840],
the Court had held that an offer was published on the new terms that did not consist in the
offer that was stated3. It was rather considered to be rejected of the offer that was followed by
a counter offer whereas an offeree can make an attempt that will not be accepted in the
original offer. Therefore, a communication from the offeree can be construed in the form of a
counter-offer even if it takes the form of a question as compared to the willingness of the
offeror to diverge the words that have been mentioned in the offer. Thus, this case study can
be treated as an example of difference between the unilateral and bilateral contracts4.
One of the major and basic distinctions between bilateral and unilateral contracts is
that in case of bilateral contracts, the parties have the authority to negotiate the terms and the
conditions of a contract and promises are made between the parties. Whereas, in case of
unilateral contracts, only one party exists who promises the other in the form of
1 Partridge v. Crittenden [1968] 1 W.L.R. 1204.
2 Grainger & Sons v. Gough [1896] A.C. 325
3 Hyde v. Wrench [1840]
4 Eckhardt Marine GMBH v. Sheriff, High Court of Malay.

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consideration5. The concept of unilateral contracts can be illustrated by the case of Carlil v
Carbolic Smoke Ball. In this scenario it was observed that one of the members of the Smoke
Ball Co. had placed an advertisement in a newspaper. For this advertisement he had promised
to pay $100 to anyone who will use the Carbolic Smoke Ball for a period of two weeks and
after that contracts influenza. On the other hand, the plaintiff used it, contracted influenza,
and therefore claimed for the reward. Therefore, when the reward was denied, Mrs. Carlil
sued the Smoke Ball Co. However, the judgment was in favor of the plaintiff. The Court had
held that a contract existed and stated that the advertisement was treated to be a promise,
which was an offer of the unilateral contract6. On the other hand, in the case of Harvey v
Facey [1893], a bilateral contract was formed between the plaintiff and the defendant. Both
the parties had agreed to promised to sell and buy the product. The promise existed between
both of them.
In a unilateral contract, only one party involved in the contact makes the promise. For
instance, a reward contract is a kind of an unilateral contract. If A promises to pay a reward to
B if he finds A’s dog. Therefore, as observed B is not forced to find the dog of A but A will
be entitled to pay the reward to B if he finds the dog. It can be said that the condition related
to this was looking for the dog precedent to the obligation that A has to pay. An offer of an
unilateral contract are generally made to plenty of people with the help of an advertisement.
In such a situation, the acceptance will arise depending on the satisfaction of the condition
involved. For example, like finding the dog as mentioned above7. However, if the condition is
something related to the fact that only one party can perform both the offeree and the offeror
will be protected. The offeror is therefore protected because of the fact that he will be obliged
5 Blau, Peter. Exchange and power in social life. Routledge, 2017.
6 Miller, Lauren D. "Is the Unilateral Jurisdiction Clause No Longer an Option: Examining Courts' Justifications
for Upholding or Invalidating Asymmetrical or Unilateral Jurisdiction Clauses." Tex. Int'l LJ 51 (2016): 321.
7 Hendrikse, George, Patrick Hippmann, and Josef Windsperger. "Trust, transaction costs and contractual
incompleteness in franchising." Small Business Economics44.4 (2015): 867-888.

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contractually to one of the many existing offerees and he protected thereafter the offeree was
protected. This is because if the condition was performed, the offeror will be obliged
contractually to pay her. The requirement states that the acceptance can be communicated to
the offeror when it is waived. The offeree thereafter accepts the condition by performing the
activities. The performance of the offeree is considered the price as related to the promise of
the offeror. On the other hand, the Courts usually favor bilateral contracts. However, both the
existing contracts are enforceable in the Court. When an individual wishes to fulfill the
activities demanded by the promisor it is known as a bilateral contract. It is enforceable as
both the parties are bound by the promise8.
The case of Fisher v Bell [1961], stated that the goods or products that are generally
displayed in the shops are not always making officers but provides an invitation to treat. The
consumer thereafter makes an offer to buy or purchase the goods displayed. Therefore, there
was promise and consideration in the contract that was created between the plaintiff and the
defendant. In the case of Turner Kempson & Co v Camm, it was observed that there was an
exchange of documents that dealt with the sale of raspberry pulp. Lastly, the final contract
note them between them was delivered by the plaintiff to the supplier who was the
defendant9. The provisions for the delivery tool place in 3 lots of 5 tons each within a period
of ten days. The defendant later claimed that there was nit contract and sought to ignore the
completion of the contract. However, the Counsel for the plaintiff suggested that the
differences occurred in the situation was not stipulated.
As per Section 4(1) of the Act, the communication of the offer made by the plaintiff
was treated to be completed and effective when the plaintiff was made aware of it. The
8 Osmonbekov, Talai, et al. "The impact of social and contractual enforcement on reseller performance: the
mediating role of coordination and inequity during adoption of a new technology." Journal of Business &
Industrial Marketing31.6 (2016): 808-818.
9 Spitko, E. Gary. "The Will as an Implied Unilateral Arbitration Contract." Fla. L. Rev. 68 (2016): 49.

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communication of the said offer with the help of posting was deemed to have been made by
any kind of activities of the parties that had proposed the party by which he had intended to
communicate the proposal. For instance, when the Pepsi Company had advertised the product
of Pepsi by producing the incentives to the customers, they can purchase their products. In
return if they gather a certain number of pepsi coins then they will be given a hariet jet.
Among the customers, one of them gathers the required number of but they can be rejected
for fulfilling the promise10. Therefore, the customers can sue the company of Pepsi for the
breach of a unilateral contract. This is because they were legally bound to fulfill the promise
when the acceptance related to the offer was completed. However, it can therefore be stated
that the unilateral contracts must be legally enforced by making use of the socialistic
approach. In the situation of a unilateral contract, an advertisement made to the public is
generally treated to be as an offer. Therefore, an advertisement that promises a reward to
another individual who produces information about a specific criminal will be considered to
be an offer11. On the other hand, an advertisement is usually issued to the general public by a
seller of the goods is not treated to be an invitation to treat and not an offer. When one
individual is obliged in fulfilling the promise then he will be bound to do it. In the case of
Bowerman v Association of BritishTravel Agents Ltd. it was observed that the plaintiff had
ordered or booked a holiday with a tour operator12. After his bookings were done, the tour
operator became insolvent. Therefore, since a valid bilateral contract existed between the
plaintiff and the defendant, the tour and travel company was bound to repay the amount,
which the plaintiff had invested. The claimants had therefore accepted the offer by carrying
out the duties that were needed to do13. Therefore, on the acceptance of the offer, a unilateral
10 Lipshaw, J. "Formalism, Speech Acts, and the Realities of Contract Formation." Speaking of Language and
Law: Conversations on the Work of Peter Tiersma (2015): 89.
11 Pouryousefi, Sareh, and Jeff Frooman. "The problem of unilateralism in agency theory: towards a bilateral
formulation." Business Ethics Quarterly 27.2 (2017): 163-182.
12 Bowerman v Association of BritishTravel Agents Ltd.
13 Afacan, Mustafa Oǧuz, and Bertan Turhan. "On relationships between substitutes conditions." Economics
Letters 126 (2015): 10-12.

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contract was formed between the claimant and the other parties. It can be concluded stating
that the plaintiff had done his part by accepting the offer and it was made necessary for the
ABTA to protect the plaintiff. Otherwise, it would have suffered economic loss since he had
relied on the terms of the contract of the tour14.
Bilateral contracts on the other hand are used in the small businesses. These contracts
are significant in all the aspects of the business and must make sure that the business grows.
Retail businesses are the common examples of bilateral contracts15. As observed, every sale
of good made is a bilateral contract16. The business generally agrees to relocate the ownership
of the goods that were exchanged for a specified amount. Therefore, as observed it can be
stated that the mutual exchange of promises defined a bilateral contract. However, small
businesses generally form plenty of bilateral contracts and the nature of the contracts can be
marked usually17. The consumers, agreements with purchasers and other businesses can
continue to develop and become successful. On the hand, the unilateral contracts are formed
either for the public or the entire world. For instance the reward offers and advertisements.
There are exceptional cases as well, where the unilateral contracts are formed to single
individuals like the unilateral offer. Daulia v Four MilBank Nominees, formal contracts
were exchanged but it was argued that they did not attain a unilateral contract because of the
first defendants that they would enter into a written contract of sale. The issue of revocation
related to the contract stated that if the acceptance is not offered at the time of the offer is
made, then it will not be considered to be valid18. However, it can be clearly and evidently
14 Abdi, Majid, and Preet S. Aulakh. "Locus of uncertainty and the relationship between contractual and
relational governance in cross-border interfirm relationships." Journal of Management 43.3 (2017): 771-803.
15 Fleiner, Tamás, et al. "Trading networks with bilateral contracts." (2016).
16 Comola, Margherita, and Marcel Fafchamps. "Testing unilateral and bilateral link formation." The Economic
Journal124.579 (2014): 954-976.
17 Poole, Jill, James Devenney, and Adam Shaw-Mellors. Contract law concentrate: law revision and study
guide. Oxford University Press, 2017.
18 Hill, Andrew. "Something for Nothing: Explaining Single-Sided Contract Variations." Oxford U.
Undergraduate LJ (2015): 75.

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distinguished from the bilateral contracts as unilateral contracts are formed for the general
public.
Based on arguments mentioned or stated above it can be observed that it is mandatory
for the unilateral contracts to be enforced for maintaining the economic and social order in
the society. Therefore, it can be stated that in case of the offers of rewards, any kind of
reward usually comes from the unilateral contracts. The problems that can arise from the
contract is when either of the party breaches or violates the agreement or contract. This is
because the unilateral contracts are created by an individual who is said to be legally bound to
the promise that have been made19. The promisee on the other hand is that individual who
carries out the activities that are needed by the promisor. In case of the bilateral contracts, the
concept of offers of rewards will not be applied as both the parties involved should make the
promises where both of them will agree on it simultaneously20. This is because it requires
both the parties to make the promises during the time the contract is made. The element of
time also distinguishes unilateral contract from a bilateral one. In a unilateral form of
contract, the promisor who is making the offer must mention the time period or the duration
of the offer. On the contrary, in case of a bilateral contract, the parties involved in the
contract should agree upon a particular tine where the goods must be delivered. If either of
the parties fail then it will be treated to be a breach of contract. Therefore, it can be concluded
stating the fact that after a thorough critical analysis, there are few major difference of
opinions regarding the these two contracts of unilateral and bilateral. The legislation of
Malaysia has been followed and therefore in such situations, the Company Security. Lastly, it
19 Gabbard, Jason, Jana Z. Sukkarieh, and Federico Silva. "Writing and reviewing contracts: don't you wish to
save time, effort, and money?." Proceedings of the 15th International Conference on Artificial Intelligence and
Law. ACM, 2015.
20 Chueh, Yvonne, Angel Caţaron, and Răzvan Andonie. "Mortality rate modeling of joint lives and survivor
insurance contracts tested by a novel unilateral dependence measure." Computational Intelligence (SSCI), 2016
IEEE Symposium Series on. IEEE, 2016.

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can be stated that individuals can form the contracts of both kind. As per the differences of
these two contracts, the importance of it suggests that both can be formed.

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References:
Abdi, Majid, and Preet S. Aulakh. "Locus of uncertainty and the relationship between
contractual and relational governance in cross-border interfirm relationships." Journal of
Management 43.3 (2017): 771-803.
Afacan, Mustafa Oǧuz, and Bertan Turhan. "On relationships between substitutes
conditions." Economics Letters 126 (2015): 10-12.
Blau, Peter. Exchange and power in social life. Routledge, 2017.
Bowerman v Association of BritishTravel Agents Ltd.
Chueh, Yvonne, Angel Caţaron, and Răzvan Andonie. "Mortality rate modeling of joint lives
and survivor insurance contracts tested by a novel unilateral dependence
measure." Computational Intelligence (SSCI), 2016 IEEE Symposium Series on. IEEE, 2016.
Comola, Margherita, and Marcel Fafchamps. "Testing unilateral and bilateral link
formation." The Economic Journal124.579 (2014): 954-976.
Eckhardt Marine GMBH v. Sheriff, High Court of Malay.
Fleiner, Tamás, et al. "Trading networks with bilateral contracts." (2016).
Gabbard, Jason, Jana Z. Sukkarieh, and Federico Silva. "Writing and reviewing contracts:
don't you wish to save time, effort, and money?." Proceedings of the 15th International
Conference on Artificial Intelligence and Law. ACM, 2015.
Grainger & Sons v. Gough [1896] A.C. 325
Hendrikse, George, Patrick Hippmann, and Josef Windsperger. "Trust, transaction costs and
contractual incompleteness in franchising." Small Business Economics44.4 (2015): 867-888.

10CONTRACT LAW
Hill, Andrew. "Something for Nothing: Explaining Single-Sided Contract
Variations." Oxford U. Undergraduate LJ (2015): 75.
Hyde v. Wrench [1840]
Lipshaw, J. "Formalism, Speech Acts, and the Realities of Contract Formation." Speaking of
Language and Law: Conversations on the Work of Peter Tiersma (2015): 89.
Miller, Lauren D. "Is the Unilateral Jurisdiction Clause No Longer an Option: Examining
Courts' Justifications for Upholding or Invalidating Asymmetrical or Unilateral Jurisdiction
Clauses." Tex. Int'l LJ 51 (2016): 321.
Osmonbekov, Talai, et al. "The impact of social and contractual enforcement on reseller
performance: the mediating role of coordination and inequity during adoption of a new
technology." Journal of Business & Industrial Marketing31.6 (2016): 808-818.
Partridge v. Crittenden [1968] 1 W.L.R. 1204.
Poole, Jill, James Devenney, and Adam Shaw-Mellors. Contract law concentrate: law
revision and study guide. Oxford University Press, 2017.
Pouryousefi, Sareh, and Jeff Frooman. "The problem of unilateralism in agency theory:
towards a bilateral formulation." Business Ethics Quarterly 27.2 (2017): 163-182.
Spitko, E. Gary. "The Will as an Implied Unilateral Arbitration Contract." Fla. L. Rev. 68
(2016): 49.