Question

Nichols is the principal owner of Samuel Nichols, Inc., a real estate firm. Nichols signed an exclusive brokerage agreement with Molway to find a purchaser for Molway’s property within ninety days. This type of agreement entitles the broker to a commission if the property is sold to any purchaser to whom it is shown during the ninety-day period. Molway tried to cancel the brokerage agreement before the ninety-day term had expired. Nichols had already advertised the property, put up a “for sale” sign, and shown the property to prospective buyers. Molway claimed that the brokerage contract was unilateral and that she could cancel at any time before Nichols found a buyer. Nichols claimed that the contract was bilateral and that Molway’s cancellation breached the contract. Discuss who should prevail at trial. What is the difference between a bilateral and unilateral contract?

Answer 1

The court most likely found that the contract was bilateral and Molway's cancellation had breached the contract, because Nichols had signed the agreement and already begun performing the contract. He started his best efforts to market the property. He had already advertised the property, put up a “for sale” sign, and shown the property to prospective buyers. Thus, the contract was binding for ninety days. Even if the contract had been deemed unilateral, the court might still have ruled for Nichols, because that company had acted in justifiable reliance on Molway’s promise. Hence, Nichols can prove in the court that, the contract was existed, it was breached, he suffered a loss and the person he is challenging was responsible.

A bilateral contract is an agreement between at least two people or groups. It means one person promises a certain action to another person or party in response to that person or party's action. Most business and personal contracts fall into this category.

Unilateral contracts involve an action undertaken by one person or group alone. In contract law, unilateral contracts allow only one person to make a promise or agreement. Here one person promise to pay another person if he fulfills an obligation. In this case, only one person is taking any action in this contract, as no one is specifically responsible or obligated to perform it.
In a unilateral contract, only one party is legally bound to perform his part, when the contract comes into force. On the other hand, in a bilateral contract, both the parties are legally bound to perform their obligation.