Unilateral Contract
What Does Unilateral Contract Mean?
A unilateral contract refers to a legally binding promise made by one party to another, where the other party is not obligated to fulfill specific legal requirements under the contract. For example, an insurance contract is a unilateral contract because the insurer promises to provide coverage to the insured once the latter is officially recognized as a policyholder.
Insuranceopedia Explains Unilateral Contract
In a unilateral contract, one party is legally obligated to fulfill the promise outlined in the agreement, while the other party is not bound by such obligations. For instance, in a TV cable service subscription, the cable provider is required to grant the subscriber access to the agreed-upon content. However, the subscriber retains the right to cancel the subscription at any time.
Similarly, in an insurance contract, the insurer is obligated to honor a policyholder’s valid claim and provide the corresponding payment or service. The policyholder, on the other hand, can choose to stop paying premiums and cancel the policy at their discretion.
