Unilateral Contract
In real estate, a unilateral contract is a type of contract in which only one party makes a legally enforceable promise or commitment. Unlike a bilateral contract, where both parties exchange promises and obligations, a unilateral contract involves a promise by one party in exchange for the performance of a specific act by the other party.
Key features of a unilateral contract in real estate include:
1. Promise by One Party: In a unilateral contract, one party (the promisor) makes a promise to perform a certain action or provide something of value to the other party (the promisee) upon the occurrence of a specified event or condition.
2. Performance Trigger: The promise made by the promisor is contingent upon the promisee’s performance of a specific act or condition. Until the promisee performs the required action, the promisor is not obligated to fulfill their promise.
3. Unilateral Obligation: The promisor’s obligation to perform is unilateral, meaning it is dependent solely on the promisee’s fulfillment of the specified condition. If the promisee fails to perform, the promisor is not obligated to fulfill their promise.
4. Example in Real Estate: A common example of a unilateral contract in real estate is an open listing agreement between a property owner (the promisor) and a real estate agent (the promisee). In an open listing agreement, the property owner promises to pay a commission to the real estate agent only if the agent procures a buyer for the property. The agent’s performance of finding a buyer triggers the property owner’s obligation to pay the commission.
Unilateral contracts are often used in real estate transactions, employment agreements, reward offers, and other situations where one party seeks to induce a specific action or performance from another party. While unilateral contracts can be enforceable under the law, disputes may arise over the interpretation of the contract terms, the occurrence of the specified condition, or the sufficiency of performance by the promisee.
It’s essential for parties entering into unilateral contracts in real estate to clearly define the terms and conditions of the agreement, including the triggering event or condition, the obligations of each party, and the consequences of non-performance. This helps mitigate potential disputes and ensures that both parties understand their rights and responsibilities under the contract.