Final answer:
A contract where only one party is bound to future performance is known as a unilateral contract. One party makes a promise that is open to acceptance through action by others, without a requirement for the other party to perform unless they choose to engage.
Step-by-step explanation:
A contract whereby only one party is bound to future performance is said to be a unilateral contract. Unlike bilateral contracts, where both parties exchange mutual promises to perform certain actions, a unilateral contract involves a promise made by only one party. The other party is not required to perform, but if they do, the promisor must fulfill the agreed-upon terms.
In a classic example of a unilateral contract, a person might offer a reward for the return of a lost dog. Here, the person who made the announcement (the offeror) is the only one who has made a promise and is legally bound to pay the reward if someone finds and returns the dog. The individuals who hear about the reward are not obliged to search for the dog; however, the offeror must pay if someone completes the task. This is a core characteristic of unilateral contracts, setting them apart from bilateral ones, which require that both parties agree to undertake certain obligations.
Moreover, the completion of the act requested by the offeror is typically the only way to accept a unilateral contract offer. No preliminary communication or promise from the respondent is necessary. In such contracts, the control lies primarily with the person who has the option to act, making it very different from most standard contractual scenarios.
It is important for parties entering any type of contract to understand these distinctions to ensure that their rights and obligations are clearly defined. Knowing whether a contract is unilateral or bilateral affects how one might approach negotiations, performance, and enforcement. Therefore, in legal education and practice, the differentiation between types of contracts is essential.