Which contract involves promises exchanged by both parties?

• A. Bilateral contract
• B. Unilateral contract
• C. Express contract
• D. Implied contract

Answer: (A)

A bilateral contract is formed when both parties exchange promises to perform. In this arrangement, each side commits to a promise: one party says, for example, “I will do X if you do Y,” and the other party reciprocates with the corresponding promise. This mutual exchange creates the binding agreement from the outset, because both sides have obligations based on the promises they’ve made.

This differs from a unilateral contract, where one party makes a promise and acceptance occurs only through the other party's performance—no mutual promises are exchanged until that act is completed. Express versus implied describes how the contract’s terms are shown (explicitly stated in writing or orally, versus inferred from conduct), but the defining feature in this case is the exchange of promises, which is what makes it bilateral.