Definition of "Unilateral contract"

Betty Thompson real estate agent

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Betty Thompsonelite badge icon

Coldwell Banker Advantage

A unilateral contract is a contract where only one part holds responsibility for whatever the document promises.

For instance, an insurance contract is usually a unilateral contract because only the insurer has made a promise of future performance, and only the insurer can be charged with breach of contract. In contrast, in a bilateral contract both parties promise future performance; both parties have their own rights and duties/obligations.

But the truth is that, if you want to get literal about it, there are no 100% unilateral contracts. All contracts are, at least, bilateral because, at the very minimum, the other party is responsible for paying once services are rendered. Let’s think of an example to make it easier to visualize a unilateral contract:

Tom and Jerry have a unilateral contract where Tom has to fix Jerry’s windows using such and such materials until the last day of that month, In return, Jerry will pay $10 to Tom. From the start, Tom has to perform an action (fix windows), in a specific time frame, with specific materials. Those are his obligations. If he ends the work on the next month, if he doesn’t use the correct materials or ends up not properly fixing the windows, he’ll be breaching the unilateral contract.

Whereas Jerry has no obligations to fulfill. That is… unless (or until) Tom finishes everything correctly; then he needs to pay up the $10 to Tom. But in theory, when talking about responsibilities within a contract, payment is not included. Payment is viewed as the outcome of an action, not the action itself. So, if only one part has obligations within that specified period of the work, it’s a unilateral contract.

Let’s bring it even deeper into real estate: an Open Listing is essentially a unilateral contract. Let’s say Homeowner Layla puts her house on the market in an Open Listing, and Real Estate Agent Alex brings an offer that Layla accepts: now she has to pay Alex a commission. However, if she’d accepted some other agent’s offer, or if she’d found the buyer by herself, she’d have no obligations with Alex. Now, an Exclusive Rights to Sell listing, on the other hand, is a bilateral contract: in it, from the start, the homeowner has the obligation to work with one real estate agent and pay him a commission even if, in the end, his work wasn’t directly responsible for landing him the sale. In return, the homeowner can use the agent’s brand/name to attract more potential buyers. As you can see, both have obligations and rights; none related to the payment.

So, whenever you hear someone talking about a unilateral contract, it probably means that Party A needs to perform something for Party B, who has no obligation but to compensate Party A, once all services are completed.

Real Estate Tip:

Speaking about unilateral contracts… there’s absolutely no contract to be made when you use The OFFICIAL Real Estate Agent Directory® to search for a local real estate agent! It’s 100% FREE and you can contact whoever you like best and go from there. That’s why it’s the best tool on the internet to connect homeowners and agents!

Comments for Unilateral Contract

Thomas Bewsher Thomas Bewsher said:

I want a unilateral termination contract for my house listing

Jul 25, 2018  22:14:46

Real Estate Agent

Hey, Thomas

We suggest you talking with a real estate lawyer to guide you through the specifics, but some things we can already anticipate for you: if the broker/agent you signed your listing with has already spent time and money marketing your property, he is within his rights to ask you to sign a document forcing you to go back to him, if you put the house in the market again during the time of your former listing contract with him. Did you get it or was it confusing? Let's storify-it:

You had this guy working to sell your home. You had a contract with him from 2018 to 2021, during which he'd do his best to sell it.
But you changed your mind (for some reason) about selling the home.
Ok, it happens.
Now, if in 2020 something changes and you decide to try and sell the home again, the real estate agent/broker has priority selling it.


Got it? 

Of course, we're sure there is much more to your story, so contact a real estate lawyer to guide you through it and good luck!

Jul 26, 2018  10:09:59
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