Life & Health Insurance Practice Exam 2026 – Your All-in-One Guide to Exam Success!

A unilateral contract is defined by the nature of its promise, wherein only one party makes a binding promise to do something in exchange for a specified act by the other party. This means that one party is under an obligation to fulfill their promise while the other party is not obligated to act unless they choose to do so.

For instance, if someone offers a reward for the return of a lost pet, the person making the offer has committed to pay the reward upon the completion of the act (the return of the pet), but the finder of the pet is not required to search for or return it; they can decide to do so if they wish. Therefore, the distinction of a unilateral contract is in its one-sided obligation.

In contrast, a bilateral contract involves mutual obligations, with both parties making promises to each other. An express contract is formed by explicit language, either spoken or written, defining the terms of the agreement, and an implied contract arises from the conduct of the parties rather than written or spoken words.