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Unilateral and bilateral contracts

Unilateral and bilateral contracts

The distinction between bilateral and unilateral contracts has been considered a fundamental principle of contract law and essential to the order of the contractual system. The focus of this analysis is to critically evaluate the theoretical legal dichotomy between unilateral and bilateral contracts and consider the practical similarities between the two.

If we firstly consider unilateral contracts, the concept of a unilateral contract is illustrated by reference to a classic contract law case of Carlil v Carbolic Smoke Ball Limited4. In this case, the defendant was the proprietor of a medical substance and placed and advert in the Pall Mall Gazette promising to pay $100 to anyone who used the carbolic smoke ball for two weeks and who for a limited time after contracted the flu virus. Mrs Carlil took the substance and contracted the flu virus and sued for the $100. Mrs Carlil's claim succeeded and on appeal, Carbolic Smoke Ball Limited argued that the advert did not constitute an offer but was rather an invitation to treat.

The Court of Appeal rejected this argument and held that there was a legally enforceable contract. The advertisement constituted an offer to the whole world and was capable of amounting to an offer of a unilateral contract without the requirement for acceptance. Moreover, this decision was the first case to highlight the requirement of intention to create legal relations. The Carlil decision had far reaching implications for contract law, with some commentators arguing that there is no difference between an “invitation to treat” and a contractual “offer”."invitation to treat" and a contractual "offer"5.

The law of contract stipulates three fundamental requirements for the formation of a legally enforceable contract; namely; offer, acceptance and consideration (it is important to note that contracting parties must have legal capacity to enter into a contract). Lord Wilberforce presiding in the case of New Zealand Shipping Co Limited v A M Satterhwaite, The Eurymedon6 asserted the rule for contract formation thus:

"English law having committed itself to a rather technical'' doctrine of contract, in application takes a practical approach''. Into the market slots of offer, acceptance and consideration7.

An "offer" in the context of contract law has been described as "an expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed, the "offeree.8"

The "expression9" may take different forms and the intention element is an objective consideration and the case of Smith v Hughes 10emphasised the relevant consideration as being a focus on how a reasonable person would view the situation.

Furthermore, the law distinguishes between an offer and an invitation to treat, which is not an offer but an indication of willingness to negotiate a contract11. For example, in the case of Gibson v Manchester City Council12, the words "may be prepared to sell" constituted an invitation to treat and not a distinct offer.

Moreover, an invitation to treat is an action inviting others to make an offer. Whereas an offer is itself binding, accepting an invitation to treat is making an offer13. This is particularly evident in the construction industry where tender ...Show more


Unilateral and bilateral contracts
In general terms, a bilateral contract is one where a promise by one party is exchanged for a promise or exchange of promises, referred to as "mutuality of undertakings"…
Author : hchamplin
Unilateral and bilateral contracts essay example
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