Which contract is formed by an exchange of promises between both parties?

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

Answer: (A)

A bilateral contract is formed by an exchange of promises between both parties. In this setup, each side commits to a duty: one promises to pay or perform, and the other promises to deliver or act. The contract comes into existence when those promises are exchanged and accepted, so both sides are bound from that moment.

Think of it this way: the essence is mutual promises. An express contract is about how clearly the terms are stated (in words), and can be either bilateral or unilateral depending on whether promises exist on both sides or a promise is made in exchange for an action. An implied contract arises from conduct rather than promises. A unilateral contract, by contrast, involves a promise by one party in exchange for an act by the other, and the contract forms only when that act is completed.