Which type of contract is characterized by a promise in exchange for a promise?

A bilateral contract is defined by the mutual exchange of promises between two parties. Each party in a bilateral contract makes a commitment to fulfill an obligation; for instance, in a real estate transaction, one party agrees to sell a property while the other party agrees to pay a specified amount. The essence of a bilateral contract lies in this exchange, where both parties are bound by their promises and can seek enforcement if one of the parties fails to fulfill their obligations.

In contrast, a unilateral contract involves only one party making a promise that the other party can accept without making a counter-promise. An executed contract refers to one that has been completed, while a void contract is one that lacks legal validity and cannot be enforced by law. Understanding these distinctions clarifies why the bilateral contract is correctly identified as being characterized by promises exchanged between two parties.