What does the term 'unilateral contract' indicate?

The term 'unilateral contract' refers specifically to an agreement in which only one party is bound to perform certain obligations while the other party's obligation is contingent upon the performance or action of the first party. In this type of contract, one party makes a promise or undertakes an obligation that is only fulfilled if the other party performs a specific action. A classic example of this is a reward contract, where one party offers a reward for information leading to the recovery of a lost item, and only the person providing that information is legally entitled to the reward.

This definition highlights that the essence of a unilateral contract is the conditionality of the obligation; the second party is not obliged to act or perform unless the first party's performance is initiated. This distinguishes unilateral contracts from bilateral contracts, where both parties have mutual obligations that they must fulfill. The unilateral nature effectively means that until the action is performed, only one party bears the obligation, making this answer the accurate representation of the term's meaning in a legal context.

In contrast, other options describe characteristics of different types of contracts or situations that do not accurately embody the definition of a unilateral contract.