Which type of contract means that only one party makes a promise?

A unilateral contract is one where only one party makes a promise to perform a certain action or provide a benefit, while the other party does not make any promises in return. This type of contract is often used in scenarios such as insurance policies or rewards programs, where one party (the insurer or the person offering the reward) commits to fulfilling a promise in response to an event, such as the presentation of a claim or discovery of a lost item.

For instance, in the context of an insurance policy, the insurer promises to pay for covered losses if they occur, but the policyholder does not make a promise in return; rather, they simply have to adhere to the terms of the policy. This characteristic differentiates unilateral contracts from bilateral contracts, where both parties exchange promises.

Understanding the concept of unilateral contracts is essential in various insurance contexts, as it often dictates the responsibilities and expectations of involved parties without requiring mutual promises.