Bilateral vs. Unilateral Consideration

A big part of contracts is about determining whether a party’s promises are enforceable. A promise is enforceable when it is supported by valid consideration. Some promises or contracts are unilateral and some are bilateral.

Whether you are reading a case or on an exam, it is important to be able to spot the difference between bilateral and unilateral promises or contracts. It’s also important to understand how consideration works in relationship to bilateral and unilateral contracts.

Let’s take a look at bilateral consideration. Generally speaking, when a promisor makes a promise and the promisee makes a promise in return then that sort of exchange is considered bilateral because both the promisor and the promisee exchanged promises with one another. This type of exchange is called bilateral consideration.

Let’s say that Super Cool offers to buy Big Steve’s boom box for $100. Super Cool’s offer to Big Steve is a promise. Let’s also say that Big Steve agrees to sell Super Cool the boom box for the $100. Big Steve has also made a promise. He promises to sell his boom box to super cool in exchange for $100.

On one hand there is valid consideration here under both the benefit/detriment and the bargain theory. Under the benefit detriment theory, Big Steve suffers the legal detriment of losing possession of his boom box while Super Cool receives the legal benefit of possessing the boom box in exchange for the $100. Under the bargain theory, there is valid consideration because both Super Cool and Big Steve made promises to one another I exchange for something of value. For Big Steve the value is the $100 and for Super Cool the value is the boom box.

Knowing the difference between Bilateral and unilateral consideration can earn you points on an exam or make you look smart during a cold call.

Now that you’ve got the big picture, read your cases, listen in lecture and get practice analyzing bilateral consideration with practice problems.