What is a bilateral contract

Feb 21, 2017 | Commercial Contracts

A bilateral contract is a contract involving 2 parties where each party promises to do something for the other party under the contract.

The way I think about it, whilst not exactly correct but which works for me, is that ‘bi’ means 2 (think bicycle – 2 wheels) and ‘lateral’ means way or sideway, and so a ‘bilateral contract’ is one in which the promises flow 2 ways, i.e. the promises to do things under the contract flow from each party to the other party.

How Common are Bilateral Contracts?

Bilateral contracts are extremely common and would make up 95% of all contracts that you would ever see. Now we have seen a lot of contracts over the years so we haven’t just made that number up (rounded down a little but we haven’t made it up.)

Nearly every contract that a business enters would be a bilateral contract.

What are some examples of a bilateral contract?

This list could be almost endless so we will give you some examples of everyday business contracts that are bilateral:
Purchase or Sale Agreement – for a business, property, equipment, a franchise, even Intellectual Property
Supply or Distribution Agreement – for any sort of product
Consultancy Agreements, Contractor Agreements, Subcontractor Agreements
Employment Agreements
Licence Agreements – for software or a mobile app and just about every other sort of intellectual property (copyright, patents, trademarks, designs) that can be licensed.

Basically any contract that involves 2 parties where they are promising to do things under a contract, e.g. one party provides a service or a good and the other party agrees to pay for that service of good, is a bilateral contract.

In everyday life the following are good examples of a bilateral contract - going to the doctor, the dentist, hiring a movie from Netflix, using Facebook (you are agreeing to use Facebook in accordance with their terms and conditions – which is the contract between you and Facebook).

So as you can see there would be literally thousands of examples of these types of agreements.

Any questions just give us a call – we are happy to help!


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