California Life and Health Insurance Practice Exam

Which type of contract is characterized by legally enforceable promises made by only one party?

1. Mutual contract

2. Bilateral contract

3. Unilateral contract

4. Conditional contract

The correct answer is: Unilateral contract

A unilateral contract is characterized by legally enforceable promises made by only one party. In this type of contract, one party explicitly makes a promise to another, and the second party's performance of a specific act constitutes acceptance of that promise. For example, if a person offers a reward for the return of a lost item, they are making a unilateral promise; only the person who finds and returns the item must act to fulfill the agreement. The promise is binding on the party making it, but the other party is not legally obligated to perform unless they choose to do so. In contrast, a mutual contract involves mutual agreements and promises where both parties are bound to perform certain obligations. A bilateral contract requires that both sides to the agreement make promises to each other. A conditional contract stipulates that the agreement hinges on certain conditions being met, influencing the enforceability of the promises involved. Therefore, the defining feature of a unilateral contract is that it involves one-sided promises, making it the correct choice in this scenario.