In terms of OFFER and ACCEPTANCE, there are two different types of contract: unilateral and bilateral. Most conracts are bilateral, which means that each party takes on an obligation, usually by promising the other something, i.e. A promises to sell something and B to buy it. Although contracts where there are mutual obligations are always called bilateral, there may in fact be more than two parties to such a contract.
However, a unilateral contract arises where only one party assumes an obligation under the contract. Example:
- Promising to give your mother £50 if she gives up smoking for a year, or
- to pay a £100 reward to anyone who finds your lost purse, or,
- as to as the court suggested in Great Northen Railway Co v Witham (1873), to pay someone £100 to walk from London to York.
What makes these situations unilateral contracts is that only one party has asssumed an obligation – you are obliged to pay your mother if she gives up smoking, but she has not promised in turn to give up smoking. Similarly, you are obliged to pay the reward to anyone who finds your purse, but nobody need actually have undertaken to do so.
Bilateral contracts: All the parties assume an obligation under the contract.
Unilateral contract: Only one party assumes an obligation under the contract.
Carlill v Carbolic Smoke Ball Co (1893)
This case involed a unilateral contract. In this case, the Carbolic Smoke Ball Company advertised that they would pay £100 to anyone who used their product (the “smoke ball”) as directed and still contracted influenza. The company claimed to have deposited £1,000 in the bank to show their sincerity.
Mrs. Carlill used the product as instructed and still got sick. She claimed the £100, but the company refused to pay, arguing that their advertisement was not a serious offer and could not create a binding contract.
The court held that the advertisement was indeed an offer for a unilateral contract, where the performance of the conditions (using the smoke ball as directed and getting sick) constituted acceptance of the offer. Since Mrs. Carlill had fulfilled the conditions, she was entitled to the £100.
This case is a key example of a unilateral contract, where one party makes a promise in return for the performance of a specific act, and the contract is formed when the act is completed.
