In a bilateral contract, both parties are bound from the moment the contract is formed. A purchase agreement is the classic example: the buyer promises to pay and the seller promises to convey the property. In a unilateral contract, only one party is bound by a promise. An option contract is unilateral because only the seller is bound to sell if the buyer chooses to exercise the option.
A purchase agreement where the buyer promises to pay $350,000 and the seller promises to deliver the deed is bilateral — both sides are obligated. An option contract where the buyer pays $5,000 for the right to purchase within 90 days is unilateral — the seller must sell if the buyer exercises the option, but the buyer has no obligation to buy.
Use this memory aid: Bilateral = Both bound, Unilateral = one is bound. Know that a purchase agreement is bilateral, an option is unilateral, and an open listing is unilateral. An exclusive right to sell listing is bilateral because both broker and seller make promises.
Related Terms
Related Concepts
A purchase agreement is a legally binding contract between a buyer and seller that outlines the terms and conditions for the sale of real property. It is also commonly called a sales contract, purchase and sale agreement, or earnest money agreement.
Offer and acceptance is the process by which one party proposes specific terms for a contract and the other party agrees to those exact terms, creating mutual assent. This mutual agreement, also called a meeting of the minds, is an essential element of every valid contract.
A counteroffer is a response to an original offer that changes one or more terms of the offer, effectively rejecting the original offer and creating a new offer. The party who makes the counteroffer becomes the new offeror.
Consideration is something of value exchanged between parties to a contract, making the agreement legally binding. It can be money, a promise to act, a promise to refrain from acting, or anything else of value.
Earnest money is a deposit made by the buyer at the time of the offer or shortly after to demonstrate good faith and serious intent to purchase the property. It is also called a good faith deposit.
Frequently Asked Questions
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