PSI New Jersey Real Estate State Practice Exam

Which of the following is an example of a unilateral contract?

1. Mutual agreement between buyer and seller

2. Option contract with only seller's promise

3. Joint venture agreement

4. Standard purchase agreement

The correct answer is: Option contract with only seller's promise

A unilateral contract is defined as a type of agreement in which only one party makes a promise or undertakes an obligation to perform. In the context of real estate, an option contract is a prime example of a unilateral contract because it typically involves one party—the seller—agreeing to sell a property to the other party—the buyer—who has the option to purchase the property at a specified price within a certain timeframe. This illustrates that the seller is the only one bound by a promise, while the buyer is not obligated to purchase the property but has the choice to do so. The seller’s promise to sell if the buyer chooses to act upon their option highlights the unilateral nature of the agreement. In contrast, mutual agreements, joint ventures, and standard purchase agreements involve commitments from both parties, making them bilateral contracts rather than unilateral. In those cases, each party has obligations and promises toward the other, which does not fit the definition of a unilateral contract. Thus, option contracts are distinct because they engage only one party's commitment, solidifying the choice given to the other party without reciprocation at that moment.