Colorado Life Producer License Practice Test

What type of contract exists when only one party has made a legally enforceable promise?

1. Unilateral contract

2. Bilateral contract

3. Implied contract

4. Express contract

The correct answer is: Unilateral contract

A unilateral contract is defined as a legal agreement wherein only one party has made a promise or has a duty to perform, while the other party is not obligated to take any action. In this type of contract, the promise is usually contingent upon an action performed by the other party, which is often the case in situations like rewards or contests where one party promises to pay if the other party fulfills a specific condition, such as finding a lost pet. For instance, if someone offers a $500 reward for the return of a lost dog, the offeror (the one making the promise) is bound to pay if the dog is returned. However, the person finding the dog is not legally obligated to return it; they have the option to do so or not, based on their choice. This characteristic of unilateral contracts sets them apart from bilateral contracts, where both parties make mutual promises. Understanding this concept is vital because it clarifies the obligations of each party in various types of agreements, which is essential for compliance with contract law in life insurance and related fields.