Bilateral Versus Unilateral Contracts

Bilateral Versus Unilateral Contracts

A bilateral contract is one where both parties are to perform their promises or
obligations at some future time but not necessarily at the same time. A unilater
al contract is one where one of the parties performs his promises at the time of
making the contract and the other party promises to perform in the future. For
example, if Vincent promise to sell Joe a Car for $1000 and Joe promises to pay
$1000 for the car, the contract is bilateral and executory on both sides. Howeve
r if Joe promises to pay $1000 when Vincent delivers the car to him and Vincent
does so, then the contract is unilateral, executed as to Vincent but executory a
s to Joe. In other words it simply means a bilateral contract is enforceable onl
y when Joe offers to buy the car from Vincent, and Vincent agrees. And a unilate
ral contract becomes enforceable when that Joe promises to pay $1000 for the car
if Vincent agrees to deliver the car to him.
There are two kinds of contract. The usual variety is called bilateral in which
both parties promise to do something for the other, and are bound together from
a precise moment in time. This is sometimes referred to as mutuality of undertaki
ng. The less common species is the unilateral contact, in which only one party pr
omises. The other makes no promises but performs an act in return for the other
partys promise. The bilateral situation is the more normal one and is a mutual co
ntractual obligation from the outset. The contract is formed before anything is
done, though often only seconds before performance begins. The unilateral contra
ct, on the other hand, is formed only after completion of the act. Performance b
y one party and his acceptance coincide. In both bilateral and unilateral contra
cts there is offer and acceptance, but the analysis differs which I will show yo
u.
Firstly, I will discuss about the bilateral contact. An example of this type of
contract is Thornton v. Shoe Lane Parking in which a professional musician, Fran
cis Thornton, had a job for a day playing his trumpet for the BBC at Farringdon
Hall in central London. The plaintiff decided to leave his car nearby in a recen
tly opened multi-storey car park in Shoe Lane close to Fleet Street. He drove up
, pressed a button and received a ticket, at which point the barrier rose up and
he and his car entered the car park. A lift took his car to an upper floor. Thr
ee hours later the plaintiff returned from his appointment. The car was brought
down again on the lift to the place where Thornton was waiting, but as he was lo
ading some items into the boot of his car, an accident occurred. Part of the bla
me for the accident lay with himself and part with the car park as a result of n
egligence by one of the attendants. Mr. Thornton sued Shoe Lane Parking Ltd for
his own personal injuries and damage to his car. The Court of Appeal eventually
awarded him $3,637 for his injuries (he had been 50% contributorily negligent),
buy nothing for the car. It was held that a contract had been formed as soon as
he passed the ticket barrier, there being offer and acceptance and, therefore a
greement. The contract formed was bilateral in that the plaintiff had promised t
o pay in return for the defendants looking after his car. Because this was a bil
ateral contract, both parties were bound contemporaneously.
The central issue in Thornton v. Shoe Lane Parking was whether certain attempts
by Shoe Lane Parking to exclude liability for personal injuries and damage to t
he car had been incorporated into the contract. Altogether, there were three att
empts to do so by the defendants: (1) the sign outside the car park as the drive
r approached the car park, : (2) the ticket that came out from the machine and :
(3) a notice in the car park itself excluding damage to the car. The rule is th
at only terms brought to the contracting parties attention at the time of, or bef
ore the contract is formed can be incorporated into the contract. Anything said
or written after the agreement is made, example, after the acceptance of the off

er, is too late. Offer and acceptance determined the precise moment at which the
parties were contractually bound. On this basis the Court of Appeal held, the c
ontract having been formed at the barrier, that the notice outside was included,
but the ticket and sign were not.
The concept of a unilateral contract is illstrated by refrence to a classic cont
ract law case, Carlil v. Carbolic Smoke Ball Co Ltd. The defendant, Frederick Ro
e, the proprietor of a medical preparation called The Carbolic Smoke Ball , placed
an advertisement in The Pall Mall Gazette Promising to pay $100 to anyone who us
ed the Carbolic Smoke Ball for two weeks and who, for a limited period thereafte
r, contracted influenza. Mrs Louise Carlil did both and sued to recover her $100
, as promised. In the High Court, the defences of the Smoke Ball Company, indeed
most of the arguments, appear to have been about the facts rather than the law.
In commercial contract practice and litigation, or arbitration over disputes, t
he facts are indeed often more complicated and relevant to the final outcome tha
n the law in question. In Carlil some of the factual arguments were that the adv
ertisement was not accurately reported. The plaintiff had not relied on it in an
y case, had not used it properly, had never actually caught influenza and, if sh
e did, never reported it to the defendant. The court found for the plaintiff. In
the Court of Appeal, the Carbolic Smoke Ball Co as appellants raised a number o
f legal points relevant to contract law: (1) the advertisement was not an offer,
but an invitation to treat. In other words, there was no intention of making an
offer; (2) the advertisement was too vague to be an offer; (3) an offer could n
ot be made to the whole world; (4) there was no consideration for the promise (w
hether the plaintiff herself had actually bought the smoke ball) ; (5) where was
tha accepyance of the offer? In a bilateral contract the acceptance is normally
communicated., and that was not done here; (6) the advertisement was a bet or w
agering contract, in which case it would be void as contrary to public policy.
The Court of Appeal rejected most of these arguments and held that there was a c
ontract. The advertisement was held to be a promise which was an offer to the wh
ole world, and was capable of amounting to an offer of a unilateral contract. Co
mmunication of acceptance is not necessary in the case of a unilateral contract.
Consideration and acceptance could be found in Mrs Carlil taking and using the
Smoke Ball for the full two weeks. It was only at the end of this time that the
promise became legally binding. The Smoke Ball Companys offer could be revoked at
any time until she had completed performance. The Court of Appeal also dealt wi
th the consideration point. Catching influenza was not the consideration but a co
ndition (sometimes called and if clause). (I will pay you if a certain event happen
s, which you do not promise to bring about or which is outside of your control.)
. Consideration was found in Mrs Carlil using the Smoke Ball. The Court of Appe
al also found that there was an intention by the parties to treat the arrangemen
ts as contractual. The deposit of money was an important indicator of contractua
l intention. Carlil was the first case to explicitly state a requirement of inte
ntion to create legal relations.

Category : Law
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